What Hath The Stress Tests Wrought?
July 15, 2009
The issue of the day is obviously CIT. It's hard to sort out the real news from clever PR/planted stories in this situation, but it looks like the FDIC is coming out strongly against being involved in a rescue package. Given Sheila Bair's successful political positioning and strong popular appeal, it's hard to see how--once dug in--the FDIC can be moved. The lobbying frenzy has concentrated on CIT's role in financing small and medium-sized business; "the recession will be deeper if CIT fails" is the refrain. This is a weak argument--it would be straightforward to refinance this part of CIT's b
Obama's Tepid Support For The Consumer Protection Agency
July 13, 2009
In mid-March, the administration proposed that toxic assets could and would be safely removed from banks balance sheets. I was skeptical, and the the PPIP now seems to have slipped into irrelevance (loans; securities). But the administration still put an impressive effort into persuading independent analysts, and broader public opinion, that they should do something clearly beneficial for banks. This was "all hands on deck," and it definitely had an impact on the debate, at least for a while. Now, the administration's major remaining initiative is its version of a Financial Product Safety Comm
A New Direction For The Fed?
July 07, 2009
Policymakers like to make particular kinds of statements at a "low attention" moment, e.g., right before a holiday weekend. This gets items onto the public record but ensures they do not get too much attention. And if you are asked about these substantive issues down the road, you can always say, "we told you this already, so it's not now news"--usually this keeps things off the front page. Released on July 3rd (a federal holiday), and buried inside the Washington Post on Saturday (p.A12): An important speech (from June 26th) by the New York Fed's controversial President, William C.
June 03, 2009
What the banks still won't tell us.
June 03, 2009
The father, the son, and a Connecticut dynasty in peril.
What Treasury Needs Is A Distraction
May 05, 2009
The bank stress tests are beginning to create a perception problem, but not--as you might think--for banks. Rather the issue is top level Administration officials' own optics (spin jargon for how we think about our rulers). At one level, the government's approach to banks--delay doing anything until the economy stabilizes--is working out nicely. This is the counterpart of the macroeconomic Summers Strategy and in principle it is brilliant.
Treasury: Regrets, I've Had A Few
April 22, 2009
If you haven't picked up on one of the dozens of recommendations from other blogs, I recommend reading Phillip Swagel's long and detailed account of the view of the financial crisis from his seat as assistant secretary for economic policy at the Treasury Department. It's particularly useful for people like me who make a habit of criticizing government officials. The writing is dry, but much of the subject matter is fascinating. It often explains or defends Treasury's actions during the crisis, but Swagel certainly owns up to plenty of mistakes or shortcomings.
Bring In The Antitrust Division (on Banking)
April 16, 2009
In early February I suggested there was a showdown underway between the US Treasury and the country's largest banks. Treasury (with the Fed and other regulators) is responsible for the safety and soundness of the financial system, the banks are mostly looking out for their own executives, and the tension between these goals is - by now - quite evident. As we've been arguing since the beginning of the year, saving the banking system - at reasonable cost to the taxpayer - implies standing up to the bankers. You can do this in various ways, through recapitalization if you are willing to commit
The Oracle Is Upbeat
March 11, 2009
Warren Buffett, always the contrarian, takes a rather sanguine view of the banking sector. From his recent three-hour interview with CNBC: BUFFETT: Yeah, the interesting thing is that the toxic assets, if they're priced at market, are probably the best assets the banks has, because those toxic assets presently are being priced based on unleveraged buyers buying a fairly speculative asset.
The Scoop Factory
March 04, 2009
On the evening of January 22, a few hours after his administration's debut news conference, Barack Obama made a surprise visit to the cramped quarters of the White House press corps. It was meant to be a friendly event, and Obama glad-handed his way through reporters and cameramen, exchanging light banter as he went. But Politico reporter Jonathan Martin wasn't there to chat. Martin pressed Obama about the president's decision to nominate William J. Lynn III, a former defense lobbyist, to deputy defense secretary and about Obama's pledge to curtail the influence of lobbyists.