Paul Krugman speaks acronymese.
February 10, 2009, 12:17 pm
Posted by Margaret O'Brien Steinfels
“I was going to dub the new financial plan TANF 2 — temporary assistance to needy financial institutions, without, you know, any of the means-testing or work requirements involved when poor people get help.
“But Jamie Galbraith (private communication) has trumped me; he says it’s the Bad Assets Relief Fund.”
Nice.
The Japanese were able to keep their recession going for a decade because the banks refused to revalue their blown real estate assets to current market prices. I think the US is trying to coax our bad assets out of hiding by offering to cover the losses. But the bank presidents are still reluctant to come clean because someone might actually ask them to take a pay cut, whereas if they continue to pretend that it’s a 2005 housing market they can keep the gravy flowing in their direction (maybe). We don’t know how much this whole thing is going to cost, because we don’t know how deep the rabbit hole is yet. Good times. And BARF is right.
Wall Street just barfed:
The Dow Jones industrial average dropped 381.99 points points, or 4.6 percent, to close at 7,888.88. The Dow had fallen as much as 420 points in the last half hour of trading.
The question: If Wall Street is unhappy enuf to lose 420 pounds, should the rest of us conclude that maybe the plan isn’t so bad? Bring me my tea leaves. Or would sheep entrails be more accurate?
The problem at this point is that massive amounts of capital are simply gone and gone for good. The “market” keeps hoping that the government (or “Uncle Sugar” as my veteran brother used to call it) will literally turn the clock back and make the assets reappear via the bail out, leaving the financial institutions otherwise intact in their structures (and most importantly, in their senior staff).
Now the bail out passed, but the government hasn’t really said where the line forms for those people who want to try to get their money back. Also, the government is attaching “strings” to things, which unlike any other investor they should not be allowed to do because….well, just because.
A 42-minute Australian perspective:
http://www.abc.net.au/4corners/special_eds/20090209/gfc/
My favorite quote from the NYT story:
“We’re not impressed, and I don’t think the market’s impressed either,” said Ryan Larson, head equity trader at Voyageur Asset Management. “It’s clear the administration is still trying to work on something concrete. I think the market sensed that, too.”
Hey, Ryan, guess what–we’re not too impressed with you and your cronies, either…This is like the GOP preaching fiscal disciplne to Obama. A re-definition of chutzpah?
Alternative theory about Wall Street swoon yesterday: the so-called “stress test” of banks (I am assuming serious audit of the books) will reveal how bad (bankrupt) some banks are and no one will give them money; ergo, they file for bankruptcy themselves and neither taxpayers nor “vulture” investors have to prop them up.