Pity Barack Obama’s economic advisers. The blogs are now demanding their scalps, and Treasury Secretary Tim Geithner and his colleagues face a nasty dilemma: There are no solutions to the banking crisis without extraordinary political and financial risks. Thus, they have adopted a three-pronged approach, delay, delay, delay, in the hope that somebody comes up with a breakthrough.
Here’s the problem: Today’s true market value of the U.S. banks’ toxic assets (that ugly stuff that needs to be removed from bank balance sheets before the economy can recover) amounts to between 5 and 30 cents on the dollar. To remain solvent, however, the banks say they need a valuation of 50 to 60 cents on the dollar. Translation: as much as another $2 trillion taxpayer bailout.
Congressional anger is likely to intensify when policymakers realize that credit default swaps demand a stream of premium payments like a life insurance policy, not just a payment due at termination. And recent signs indicate that firms such as Citigroup, in recycling their taxpayer bailout funding, may have helped other financial firms, including some in Europe, meet these payment obligations.
Turbo Timmeh no longer has Hanky Panky to tell him what to do. Now that he has Hanky Panky’s job, perhaps Timmeh thought the same tactic would work for him? Or maybe he believed Panky when he indicated that the economy was fundamentally sound? Making his new job the gravy train he thought it would be?
In the future be careful what you ask for, Timmeh, you just might get it.
Always with the unintended consequences, you guys slay me
“American International Group Inc., the insurer that got four bailouts from the federal government, has been the subject of complaints from rivals who say the firm is underpricing commercial coverage, a regulator said. Competitors have said AIG was able to charge lower rates after getting government help, said New York Insurance Superintendent Eric Dinallo in an interview with Bloomberg Television today.”
Peak oil, peak population, peak civilization, peak credit, peak debt… HelloOOOooo, perpetual-growth-as-an-unsustainable economic model… peak-a-boo!
Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.” -Thomas Friedman
“We just wanted to pick, like, a really really impressive number.” -Hank Paulson, chewing gum as he describes his economic recovery team’s budget number when confabulating the funds required for a bailout out.