Time was, a major upward swing in the market followed by a half-point cut by the Fed would send American investors on a buying spree. But that time has probably passed. Today Ben Bernanke and Co. are expected to make another interest-rate cut, but market futures were trending down nonetheless. Is that because they don’t expect it to do much? Because they’re withdrawing from yesterday’s frenzy? Or are they reacting to the renewed drop in home prices and abysmal consumer confidence?
With the quiet dexterity of a pickpocket, the Treasury is restructuring the American banking sector, and so far the public seems either uninterested or unaware. Because the feds put few conditions on what exactly banks should do with their share of the $700 billion bailout, they’re using it to buy up competitors at an alarming rate--with Treasury’s approval.
Former Treasury Secretary and frequent Financial Times columnist Larry Summers has a good piece this morning reminding policymakers to keep an eye on the very big picture as they craft a response to the financial crisis. While short-term fixes may be necessary, he writes, it’s important to remember that the foundation of the last two booms has been remarkable U.S. productivity growth, which in turn fueled consumer spending and investment. A drop in productivity, then, is the real problem underlying the crisis.
Last week the markets settled a bit and we thought it was the bottom; the last few days proved it was just a ledge. Overnight U.S. stock futures fell so low after bad news from Asian markets that trading was actually frozen. Some say the S&P has to reach 800 before the bottom is reached, but the big unknown is the psychology of the panic. What will assuage scared investors? Any thoughts? It would be a mistake to put too much blame for the current downturn on Alan Greenspan--there's more than enough to go around.
The Dow is set to drop precipitously again today on worse-than-expected job numbers--though, given recent volatility, who knows?--but the good news is that if you have any money left, now is a great time to go to Europe. The dollar is at a two-year high against the euro. On the flip side, that’s bad news for U.S. manufacturers, who were hoping that lagging domestic sales could be partially made up for overseas. FDIC Chair Sheila Bair is going before Congress today to discuss several plans for mortgage relief. This is a tough one.
According to the Washington Post, the Small Business Administration has been falsely qualifying large companies and their subsidiaries as small businesses, allowing them to get billions in government contracts that should have gone to small companies. Unfortunately, the Post paints this as a revelation, when in fact the small-business community has complained about it for years. Though the article quotes Lloyd Chapman, head of the American Small Business League, it fails to note any of the yeoman’s work his group has been doing on this issue.
The credit markets thawed a little last week, stock volatility is down (though still high), and the world’s leading economies are all finally on the same page regarding the need for concerted government action. Will this week be the first sign of light? For my money (heh, heh), the Financial Times has the best columnist roster in the world, at least when it comes to business and economics. With Wolfgang M
Thanks to news of the worst month for housing starts in 17 years--and despite better-than-expected quarterly returns from a bevy of businesses--the market is expected to drop again today. That said, it's a relatively slow day in the biz biz: British PM "Flash" Gordon Brown continues his push for a new global financial architecture, this time in the Washington Post: "The old postwar international financial institutions are out of date. ...
A lotta great stuff in the papers this morning, so let’s begin: An important side story to the financial meltdown has been the way British Prime Minister Gordon Brown has used it to narrow the gap between him and his Tory opponent, David Cameron; until recently, Cameron had been up by double-digit points and the British commentariat has largely written Brown off. But early on, Brown, the former chancellor of the exchequer, said that a crisis of this magnitude meant the UK couldn’t afford to let a newbie (Cameron is just 42) take over.
Starting this morning I’ll be posting links to must-read articles and reports around the web. Because some of them--the Wall Street Journal, for example--are behind firewalls, I’ll try to give a sense of their key points as well. One subscriber-only site I’ll be referencing a lot is the Financial Times.