The attempt to save the banking system is looking more and more like a suicide mission for the US government as estimates of bad loans rise above $3 trillion.
* Losses may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year’s economic crisis. “If that’s true," he says. "it means the US banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”
*At confirmation hearings for the new Treasury Secretary, Sen. Chuck Schumer reveals that Wall Street sources tell him that, if the government wants to clean out all the toxic assets from the financial system, it will cost $3-4 trillion dollars..
*Financier George Soros criticizes the "bad bank" solution of taking troubled assets off balance sheets.
Such measures, he says, would provide "artificial life support for the banks at considerable expense to the taxpayer, but would not put the banks in a position to resume lending at competitive rates."
He argues instead for "partially nationalizing" banks, which "would inflict great pain on a broad segment of the population--not only on bank shareholders but also on the beneficiaries of pension funds" but "would clear the air and restart the economy."
For non-economists, this has the makings of a headache-inducing debate in the coming weeks. When Congressional politicians (pace John Boehner) get into it, there will be a lot of garbage talk about socialism, free markets, tax cuts, etc--all of it beside the point as the financial system teeters at the edge of an abyss.
If President Obama's economic team decides to try for long-range answers rather than Paulsonish quick fixes, it's going to take all his eloquence to get the public and legislative support needed to start on them.
Showing posts with label financial meltdown. Show all posts
Showing posts with label financial meltdown. Show all posts
Friday, January 23, 2009
Sunday, September 21, 2008
The Irrelevant Presidential Candidates
As they prepare for their first debate, Barack Obama and John McCain will be upstaged this week by people who will be out of power in four months--members of the Bush Administration and Congress, many of whom retire voluntarily or otherwise at year's end.
No matter what the candidates say, our economy will be on the operating table in Washington, with the surgery being performed, if not by quacks but lame-duck politicians, few of whom have shown any aptitude for making life-and-death decisions (see "War, Iraq" and "Children, Health Insurance for").
With bipartisan urgency, Congress will give Treasury Secretary Henry Paulson power to buy up to $700 billion in distressed mortgage-related assets from private holders.
“I hate the fact that we have to do it, but it’s better than the alternative,” Paulson said in his round of appearances of the Sunday morning talk shows. “This is a humbling, humbling time for the United States of America.”
The alternative would be an unthinkable meltdown of the financial markets that would eventually throw millions of people out of work as well as their homes.
On Meet the Press, New York Mayor Mike Bloomberg admitted that "nobody knows exactly what they should do, but anything is better than nothing. You've got to restore the public's belief and the market's belief that we will go on. And this is not just an American problem, it's financial markets around the world that are all interlinked and they're all collapsing."
That's the emergency agenda for this week, but Bloomberg, who made a fortune providing instant information for the money world, points out that "we're paying the price for the last years where we all wanted something for nothing, where we took risks because we were convinced that we would never have to pay, somebody else would pay on the downside, but we'd keep the profit. Congress has been unwilling to address the fundamentals of this country--an energy policy that makes sense, infrastructure, health care..."
All this will land in the lap of the next president and Congress that Americans will be voting into power six weeks from now. There will be no shortage of promises and finger-pointing in the campaigning until then, but to get us there, the lame ducks will have to get it right in the next few days.
No matter what the candidates say, our economy will be on the operating table in Washington, with the surgery being performed, if not by quacks but lame-duck politicians, few of whom have shown any aptitude for making life-and-death decisions (see "War, Iraq" and "Children, Health Insurance for").
With bipartisan urgency, Congress will give Treasury Secretary Henry Paulson power to buy up to $700 billion in distressed mortgage-related assets from private holders.
“I hate the fact that we have to do it, but it’s better than the alternative,” Paulson said in his round of appearances of the Sunday morning talk shows. “This is a humbling, humbling time for the United States of America.”
The alternative would be an unthinkable meltdown of the financial markets that would eventually throw millions of people out of work as well as their homes.
On Meet the Press, New York Mayor Mike Bloomberg admitted that "nobody knows exactly what they should do, but anything is better than nothing. You've got to restore the public's belief and the market's belief that we will go on. And this is not just an American problem, it's financial markets around the world that are all interlinked and they're all collapsing."
That's the emergency agenda for this week, but Bloomberg, who made a fortune providing instant information for the money world, points out that "we're paying the price for the last years where we all wanted something for nothing, where we took risks because we were convinced that we would never have to pay, somebody else would pay on the downside, but we'd keep the profit. Congress has been unwilling to address the fundamentals of this country--an energy policy that makes sense, infrastructure, health care..."
All this will land in the lap of the next president and Congress that Americans will be voting into power six weeks from now. There will be no shortage of promises and finger-pointing in the campaigning until then, but to get us there, the lame ducks will have to get it right in the next few days.
Subscribe to:
Posts (Atom)