Monday, September 22, 2008

"History’s biggest bet" - good readings

Why Paulson is (maybe) right - Charles Wyplosz

The world’s bankers created a reckless mix of lending and securitization which exploded in their faces last year; they’ve stonewalled since. It would be criminal to bail them out, but spilling blood for its own sake is foolish. Here one of the world’s leading macroeconomists explains how the ‘Paulson Package’, history’s largest bet, might work and might not cost taxpayers too much. It’s too early to know which label to apply: “bailout” or “shrewd cleansing operation”.

Why Paulson is wrong - Luigi Zingales

This weekend’s decisions will shape the type of capitalism we live with for the next fifty years. When a profitable company is hit by a very large liability, the solution is not to have the government buy its assets at inflated prices – the solution is Chapter 11.

Cash for Trash - Paul Krugman

Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

A Bad Bank Rescue - Sebastian Mallaby

With truly extraordinary speed, opinion has swung behind the radical idea that the government should commit hundreds of billions in taxpayer money to purchasing dud loans from banks that aren't actually insolvent. The scheme has gone from invisibility to inevitability in the blink of an eye. This is extremely dangerous.

Costly Rescue Could Narrow Economic Options - Mark Landler

It’s hyperbole to say we’re abandoning the free-market system. But we certainly seem to be entering a new uncharted territory of regulation.”

This is no time for politics of the playground - Clive Crook

The technocrats are in charge – Hank Paulson at the Treasury and Ben Bernanke at the Federal Reserve – and even they are making it up as they go along. President George W. Bush appeared briefly last week, noting that the country was worried about the current financial difficulties and saying, as though this were important information, that he shared those concerns. Wisely, he did not affect to take command of the situation (you thought the collapse of Lehman was a blow to confidence).

Wall Street: The dark theory - Richard Siklos

What if the underlying problem goes deeper? What if the reality is that the US economy has been a lot worse than was thought for a long time, and now the chickens are finally coming home to roost?