Wall Street and and the ASX have rallied hard in approval of US Treasury Secretary Timothy Geithner’s bank rescue plan. In this post I am going to examine the Geithner plan, try and describe and explain what it is, and then ask whether it will work. Continue reading ‘The Geithner plan: what is it, and will it work?’
Tag Archive for 'TARP'
One of the intriguing things about wading through some of the business and economics shelves of some CBD bookshops in (fruitless) search of some of the titles John Quiggin reviewed in the Fin Review on Friday (not online of course) was seeing tomes with titles such as “Bubbles last forever!”, “How to make enormous amounts of money from endless bubbles!”, “Greenspan is the greatest!”. I’m exaggerating, but not much. I suspect their shelf life is almost over, and they’re headed for the remainder bin soon. At any rate, I’ll have to cross my fingers and hope the AUD recovers soon so I can afford to buy something a tad more contemporary – and serious – from Amazon.
Since September, I’ve been wading through far more reading matter than I’d ever imagined possible on economics and finance. Much of it has been, by necessity, somewhat ephemeral. However, it’s good to see some commentators coming out with something of a longer view.
SocProf over at The Global Sociology Blog and I must be reading the same things, and thinking along similar lines, because I had planned to link to precisely the same articles she highlights in an update to my recent post on the state of the global financial crisis.
In The Guardian, Will Hutton explains why measures to halt the cascading crisis have been ineffectual to date. He might have made more explicit the implication that one of the basic structural problems is that action taken at the level of the nation state can be counter-productive given the disseminations and movements of capital, and that there are real domestic political barriers to coordinated action, as well as all the obvious problems of concertation through institutions such as the EU and the G20.
But he does make this point – harmonising with the note I’ve been sounding repeatedly – very clearly indeed:
There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, ’securitised’ capitalism existed, or any political muscle to support it even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilment, personal experience and loyalty to self.
Hutton is perhaps more sanguine than I am, though, about the capacity of state action to turn all this around. Continue reading ‘The state of capitalism today II’
Iceland may be a barometer for what’s changing in the world economy. It was only very recently that the Milton Friedman fan club was hailing Iceland as a “Nordic Tiger”, lauding its flat taxes and praising its “economic freedom”. “Economic miracle” was a common phrase. What’s it looking like after the credit crisis?
Iceland right now is apparently in a state of shock and gives a snapshot of what a depression with the Great in it will look like everywhere – “cafes were half-empty, real estate agents sat idle, and retailers reported few sales” says the AP.
This after the government basically took over its banking sector, with Russian money, which as noted in the linked post, has real geopolitical implications.
Meanwhile, the British government is laying out 500 billion pounds to take equity in its banking sector, but basically proposing business as usual. Co-ordinated interest rate cuts are having very little impact on the stock market, and more worryingly, on the liquidity crisis. Paul Krugman writes:
We’re way past the point at which conventional monetary policy has much traction.
In America, in the eye of the economic storm, the Fed has basically become the financial system, but to little avail:
The time for a recession was 2005. At that time simple macroeconomic policy; simply raising interest rates, would have ended the bubbles in credit and housing at the cost of a standard if somewhat nasty recession. Trillions of dollars of intervention would not have been needed. Just standard macro policy. Even in 2006 it might still have worked. The Fed blew it, and they broke the system, and now with the system broken they may have to either buy it all out (and Paulson may be considering that after all) or just become the system. And even if they do that may not work, because, well, who wants to borrow and invest right now?
Bernanke and Greenspan are certainly in the “worst Fed chairman of all time” stakes in a big, big way.
Earlier on tonight, the indications were that the US House of Representatives would be voting around 2am AEST on the revised version of the TARP bailout bill (with extra billions of dollars in pork to attract lawmakers’ votes – added in the Senate amendment which John “Against Earmarks and Wasteful Spending” the Maverick McCain duly voted for). It doesn’t look like that’s the case because a lot of Congressthings want to go on record for their constituents by speaking on the House floor (and/or because they have to ask questions now because the bill has never been subjected to legislative hearings, as is normal in the US Congress).
Anyway, I’m off to bed. But you can follow what’s going on via this liveblog from Catherine Rampell at the NYT’s Economix.
NB: Previous discussion and commentary at LP on the bailout, the financial markets crisis and the ramifications can be accessed here.
Update: via danny in comments -
1:25 p.m. | Bill passes: The bill passed 263 to 171. The vast majority of Democrats voted in favor (172 yeas to 63 nays), while a slighter majority of Republicans voted against (91 yeas to 108 nays).
Reaction and commentary over the fold.
Continue reading ‘Liveblogging the House debate on the TARP bailout bill’
Timothy Garton Ash, writing in The Guardian, has picked it:
Continue reading ‘House Republicans – quote of the week – it’s Dostoevsky, stupid!’
One point of view that’s been expressed about the financial markets crisis can be summed up by something I read at Crooks & Liars today:
Have you noticed that every person suddenly knows everything there is to know about how the economy works? Wow, it’s all so simple.
Maybe there’s a point there, but not the one John Amato thinks he’s making. I’ve consistently been of the view that the economy should be a subject for civic and political discussion, and that we shouldn’t hold back because of the “not an economist!” cries that sometimes echo around the place. If one of the continuing problems with the US financial sector is the lack of transparency which is causing the crisis of solvency – because no one still knows where all the securitised bodies are buried – so too a bit of transparency in demystifying the fiscal arcana whose complexity was part of the reason for this mess should be welcomed.
So, with that in mind, I wanted to share some links (from econobloggers and non-economists both) I’ve found particularly insightful and interesting over the last few days.
Continue reading ‘US economic crisis policy links post; and Obama and the economy’
Some Democratic congressfolks have had the intriguing and unorthodox idea that the role of Congress is to legislate. Ian Welsh has the details on the preparation of alternative bills to the Paulson take it or leave it (with bells and whistles to entice you to vote for it added in the Senate!) TARP measure.
I’m not sure, though, how “market sentiment” of “it’s 700 billion or the apocalypse” will deal with this development.
More at OpenLeft.
Ps: Paul Keating on Lateline last night made some very instructive points about why pumping liquidity into markets isn’t working and why Malcolm Turnbull is playing a populist game on interest rates.
[I'm borrowing the pun from Michael Bérubé]
In the absence of any more “game changing” impulsive madness from Walnuts, all eyes will probably be on the Veeps debate on Friday – although our friends in the House Republicans or more spectacular crashes on Wall Street might diminish the focus a tad. Sarah Palin won’t be able to pull a McCain though, and “suspend” her campaign, after that trick spectacularly failed as Walnuts slunk out of Washington calling for bipartisanship on one hand while slagging off Obama on the other, after fairly poor reviews of whatever contribution he may have made to the crisis from his fellow Republicans. Nor will Palin be dropped from the ticket – I think (presuming there’s any rationality to the McCain strategy). As Nate Silver observes, there are at least three good reasons why it would be dumb (but again, I’m thinking dumb is the name of the McCain game). And the last time a Veep candidate was dumped – Thomas Eagleton in 72 – McGovern dropped 7 points in the polls.
Anyway, that’s that for the moment, but in this increasingly bizarre campaign which in true postmodern style seems to have as fictive a relationship to the real world as all that fictitious capital swirling around Wall Street waiting for the government to buy it, who knows what lies ahead, or even what lies lie ahead. My main purpose in posting was to draw attention to two excellent pieces from two of my favourite Stateside online writers on the bizarre phenomenon that is the Palin pick, something I continue to believe deserves more analysis than just political calculation or the desire to diss implies.
On a day when fear ran rampant around “the markets”, some distraction from the Apocalypse might come from considering horror movies.
Incidentally, lots of the pre-tribulationist Rapture watchers in the US have been expecting the world to end on Rosh Hashanah – the Jewish New Year – which is why Congress is closing down for two days. Weird!
Anyways, back on topic. I agree this is the scariest movie scene ever. From Mulholland Drive:
The Nancy Pelosi speech that made the Republicans cry:
Context in this post about the Congressional rejection of TARP.
Vote count:
Democrats: 141 Yea, 94 Nay
Republican: 66 Yea, 132 Nay
The Times – Analysis: bailout vote calls Hank Paulson’s bluff
Negotiators had worked all weekend to accommodate some of the doubts of conservative Republicans who objected to such a massive outlay of taxpayer funds on the financial sector. But in the end the largely superficial changes made to the original plan were not enough and more than three-quarters of Republicans voted against. Worse, perhaps, more than a third of Democrats also opposed the measure, which they saw as a handout to rich bankers on Wall Street.
Now, in effect, the politicians have called the bluff of Hank Paulson, the US Treasury Secretary. Since he first proposed the plan ten days ago he has repeatedly warned that its passage was absolutely essential to avoid a complete freezing-up of the US financial system.
The details are a bit sketchy but it appears that agreement has been reached on some version of the Paulson bailout plan. Ian Welsh at Firedoglake, whose coverage of all these shenanigans has been first rate, has the lowdown on what it probably means.
It only gets more surreal.
You can read about the latest at Crooks & Liars and Firedoglake.
None of this is about the economy. It’s about rescuing McCain’s campaign, not Wall Street. But reportedly McCain’s “help” comes down to supporting a proposal by House Republican Leader John Boehner:
That proposal reportedly includes even more deregulation and further tax breaks to the financial sector, plus a prayer that Wall Street can rescue itself if the restraints are removed.
The $700 billion bail out is wildly unpopular in the States, to put it mildly. But not because the American people are taking a stand against regulation.
Update: Hilzoy at Obsidian Wings on how the deal was scuttled. McCain’s lying about his part in it, as is now routine.
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