Dear Reader: Admit it, you’ve been quietly biding your time, waiting for the day when politics would stop being about output gaps and credit default swaps and start being about something fun again, like the Rasmussen daily tracking poll. Well, it’s not happening. At least not any time soon. Which is why I’ve decided to bring you the next best thing: The fun part of economics.
Why'd Obama spend so much time selling the bank bailout last night? Partly it's that, as Jonathan Cohn says, it inspires deep skepticism, if not outright hostility, among voters. But perhaps more to the point, that skepticism has Congress absolutely frantic. Yesterday afternoon I spoke to a senior Democratic aide in the Senate who repeatedly emphasized that, the way things stand now, it would be almost impossible to get another cent for the banks. Congress has "bailout fatigue," the aide said.
Not quite as buxom or blonde as you might think, but not bad either... Swedish economist Anders Aslund has a very helpful post over at the Peterson Institute blog: Sweden did not nationalize its banks. It was Norway that did so, which is an alternative model. In Sweden, a temporary emergency bank authority was set up on the model of the US Federal Deposit Insurance Corporation. ... The banks were forced to write off their bad debts and transfer them to bad banks. Sweden had no aggregator bad bank and the bad banks were not nationalized. Each big bank set up its own bad bank. ...
...was this line about the bank bailout: "Still, this plan will require significant resources from the federal government – and yes, probably more than we’ve already set aside." Among people who follow this stuff inside and outside the administration, there's been a presumption that we're going to need more than what's left of the $700 billion bailout Congress approved last fall. But, so far as I now, this is the first time the administration has acknowledged it publicly. I'd guess Wall Street will react pretty favorably tomorrow. --Noam Scheiber
The Detroit News has a delicious little piece about the kinds of cars Obama's auto-industry task force members drive. First, the overall numbers: Among the eight members named Friday to the Presidential Task Force on the Auto Industry and the 10 senior policy aides who will assist them in their work, two own American models. Add the Treasury Department's special adviser to the task force and the total jumps to three.
In addition to starting a conversation about our long-term finances, the President probably had two goals for yesterday's fiscal summit: 1.) Preempt a domestic political revolt by voters and pundits who worry he's bankrupting the country. 2.) Convince creditors that we plan to bring our budget into balance (eventually) even though we're spending a lot right now, so they don't lose confidence in the U.S. government and dump long-term Treasury bonds. It's obviously too early to say if Obama accomplished either goal. But the early signs aren't bad.
On Friday I argued that, while the president's push to make his budget honest and transparent was great public policy, it wasn't quite as courageous as the White House suggested. But there is one element of Obama's first budget that strikes me as genuinely courageous.
First Read has a great little feature today about all the House GOP members who opposed the stimulus and, with apologies to Ricky Ricardo, now have some ferocious "'splainin' to do." We clipped a few items yesterday that mentioned House Republicans who now are for at least parts of the stimulus after they voted against it.
The Times reports today that Obama and budget director Peter Orszag are experimenting with something fairly new in preparing their budget: honesty. For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller.
Telling piece in tomorrow's FT: US bank shares hit a near 17-year low on Thursday on rising fears the government will have to nationalise troubled institutions such as Citigroup and Bank of America, wiping out investors and taking control of a large portion of the financial sector. Bank of America shares slid 14 per cent to $3.93, their lowest point since 1984. Shares in Citi were down 13.8 per cent, closing at $2.51, their lowest since 1991. The KBW banks index fell to its lowest level since 1992.