Good Finance Gone Bad
September 08, 2009
As the Lehman anniversary approaches, defenders of the financial sector struggle into position--partly in response to your comments (also here). They offer three main points: We need finance to make the economy work. Financial innovation delivers value, although it’s not perfect (but what is?). Don’t kill the goose that laid the golden egg. Point #1 is correct, but this does not necessarily mean we need finance as currently organized. The financial sector worked fine in the past, with regard to supporting innovation and sustaining growth. Show me the evidence that changes in our financial str
The Three Faces Of Ben Bernanke
August 25, 2009
Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three. The Bernanke who led the charge to rescue the US (and world’s) financial system after the Lehman-AIG collapse. If you accept that the choice from late September was “Collapse or Rescue,” this Bernanke did a great job. The Bernanke who argued for keeping interest rates low as the housing bubble developed. This Bernanke was part of the Greenspan Illusion--the Fed should ignore bubbles and “just clean up afterwards.” Is that still Bernanke’s view?
The New Banking Order
July 17, 2009
Hank Paulson's testimony yesterday was informative, if only because it illustrated that he himself still understands little about the origins and nature of the global crisis over which he presided. Perhaps his book, out this fall, will redeem his reputation. A fundamental principle in any emerging market crisis is that not all of the oligarchs can be saved. There is an adding up constraint--the state cannot access enough resources to bail out all the big players. The people who control the state can decide who is out of business and who stays in, but this is never an overnight decision written
The (only?) Case Against Geithner (cont'd)
November 25, 2008
A TPM reader makes an interesting point that, while the CW holds that the Lehman bankruptcy is to blame for the financial meltdown, the AIG bailout could have been the real culprit: I have little idea how the writers of narrative journalism, like the NY Times' Andrew Ross Sorkin decide between Lehman and AIG, when both events occurred simultaneously, but I suspect they ask industry insiders. And, industry insiders have a strong interest in blaming the failure-to-bailout, since such blame is useful politically, in motivating future bailouts.
A Glimpse Inside McCcain's Decision-making Process
July 27, 2008
Comes from Saturday's NYT: McCain's advisers were divided, for example, over a speech he gave on nuclear security policy in Denver in May. Two Republican pragmatists who advise McCain, former Secretaries of State Henry Kissinger and George Shultz, supported a call in the speech for a nuclear-free world, an idea they endorse as part of a "Gang of Four" of national security statesmen. But other advisers to McCain were opposed to the idea because, in their view, nuclear weapons act as a deterrent against an attack on the United States and its allies.