Category Archives: bailouts

Can GMAC Save GM?

Posted on November 20, 2008 by Felix

GM and Chrysler aren’t just two troubled auto companies. They are also linked by GMAC, a financial company which used to be wholly-owned by GM and which is now 51% owned by Cerberus, which also owns Chrysler. GMAC has now … Continue reading →

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Yet More Paulson Revisionism

Posted on November 19, 2008 by Felix

The second part of David Cho’s interview with Hank Paulson features even more revisionism. Get a load of this: Paulson used his influence within the administration to win even broader powers from Congress, allowing him to nationalize major financial institutions, … Continue reading →

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GM: An Alternative to Bankruptcy

Posted on November 17, 2008 by Felix

Antony Currie says that it’s possible to structure a GM bailout so that it behaves like a bankruptcy without being called a bankruptcy: If an official bankruptcy label is really too scary, another template already exists: the government bailout of … Continue reading →

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Bailout vs Bankruptcy, Obama Edition

Posted on November 17, 2008 by Felix

Barack Obama addressed the GM situation on 60 Minutes last night: Mr. Obama: My hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure … Continue reading →

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GM: The Bailout vs Bankruptcy Meme

Posted on November 16, 2008 by Felix

There’s a bailout vs bankruptcy meme going around with regard to GM — a choice which makes me want to tick "none of the above". I’ve seen it in dozens of places of late, but since it comes with the … Continue reading →

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When Stabilization Isn’t Stimulus

Posted on November 14, 2008 by Felix

Quote of the day comes from Neel Kashkari: Treasury Assistant Secretary Neel Kashkari, who is heading up the government’s implementation of the rescue plan, defended the department’s actions, saying that no one should expect the plan to solve all of … Continue reading →

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The Right Kind of Bailout

Posted on November 14, 2008 by Felix

Today’s NYT has an article about the enormous obstacles facing any Detroit bailout bill between now and October, with Senator Richard Shelby of Alabama saying that "the financial situation facing the Big Three is not a national problem but their … Continue reading →

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Reasons to Bail Out GM

Posted on November 12, 2008 by Felix

Why bail out GM? I can think of quite a few reasons: As Andrew Leonard notes, it’s what Barack Obama was elected to do. "If evangelical supporters of George Bush had the right to expect conservative judge appointments and restrictions … Continue reading →

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Paulson Looks for a Private Sector Helping Hand

Posted on November 12, 2008 by Felix

Hank Paulson wants the private sector to give him a helping hand with his bailouts: We are carefully evaluating programs which would further leverage the impact of a TARP investment by attracting private capital, potentially through matching investments. I think … Continue reading →

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Who Would Bail Out Switzerland’s Banks?

Posted on November 11, 2008 by Felix

Richard Baldwin of VoxEU gives us a sneak preview of a new article by Jon Danielsson: In this crisis, the strength of a bank’s balance sheet is of little consequence. What matters is the explicit or implicit guarantee provided by … Continue reading →

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Couldn’t the New AIG Bailout Have Waited Until January?

Posted on November 10, 2008 by Felix

Last night I asked why AIG was getting a second bailout. I think the answer came this morning: AIG lost $24.5 billion in the third quarter. Under the terms of the first bailout, AIG could effectively borrow that $24.5 billion … Continue reading →

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AIG Bailout 2: Why?

Posted on November 9, 2008 by Felix

The WSJ has details of AIG Bailout II: Under the terms being finalized on Sunday night, the government would replace its original $85 billion loan with a two-year duration with a $60 billion loan with a five-year duration. Interest on … Continue reading →

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Why Banks Should Lend Out Treasury’s Funds

Posted on October 29, 2008 by Felix

Paul Kedrosky has a peculiar argument today, saying that banks shouldn’t lend the money they’re getting from Treasury: Banks are looking at a changed world, one with deleveraging everything, consolidation happening apace, and defaults almost certain to rise rapidly over … Continue reading →

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How the Lehman Bailout Increased Moral Hazard

Posted on October 24, 2008 by Felix

David Schelicher emails with a provocative question, in the wake of my IM exchange with John Carney yesterday: what if letting Lehman fail actually increased the amount of moral hazard involved in lending to banks? "Moral hazard is based on … Continue reading →

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Should Lehman Have Been Rescued?

Posted on October 23, 2008 by Felix

I have to get on plane to Chicago, so don’t expect much more here any time soon. In the meantime, here’s an IM I just had with John Carney of Clusterstock about whether Treasury was right to let Lehman fail. … Continue reading →

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The Lease-Back Bailout

Posted on October 22, 2008 by Felix

David Leonhardt’s column today is about moral hazard in the world of homeowner bailouts: how can we help people who are genuinely having difficulty making their mortgage payments, without needlessly bailing out any old homeowner who’d simply like to pay … Continue reading →

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The Global Crisis

Posted on October 21, 2008 by Felix

On Saturday, Brad Setser, following Peter Garnham, made the very important point that while the big countries’ central banks have each others’ backs, emerging-market countries are being left out in the cold. For all the talk about how the G-7 … Continue reading →

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Will the US Make Money on its Bailout?

Posted on October 20, 2008 by Felix

Jim Surowiecki is quite sure that Treasury’s bailout plan, or at least the $250 billion part of being spent on recapitalization, is an investment rather than an expenditure: I realize that, given the way the U.S. budget is accounted for, … Continue reading →

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Ben Bernanke, Revisionist

Posted on October 15, 2008 by Felix

This, from Ben Bernanke, is disingenuous: The difficulties at Lehman and AIG raised different issues. Like the GSEs, both companies were large, complex, and deeply embedded in our financial system. In both cases, the Treasury and the Federal Reserve sought … Continue reading →

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The Unintended Consequences of Deposit Insurance

Posted on October 15, 2008 by Felix

Alan Blinder and Glenn Hubbard make a good point today: Memo to Washington: Take a deep breath and ask, "What is the problem that unlimited deposit insurance is meant to solve?" It is not people lining up to take their … Continue reading →

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Will the Banks Lend?

Posted on October 14, 2008 by Felix

The NYT’s lead headline this afternoon is unambiguous: "Treasury Chief Says Banks Must Deploy New Capital". But in 2,300 words of reporting, reaching as far as a run on the Hungarian currency, this is the only mention of any requirement … Continue reading →

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Treasury’s Standardized Terms

Posted on October 14, 2008 by Felix

The details of Treasury’s recapitalization plan are out, and it’s more or less what I expected, but with a lower coupon. In fact it looks very much like Warren Buffett’s investment in Goldman Sachs, or MUFG’s investment in Morgan Stanley, … Continue reading →

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The Weakness of the Treasury’s New Bailout Plan

Posted on October 13, 2008 by Felix

The scorpion, it seems, is staying as true as he can to his nature. And although I’m the first to admit that this is no time to worry overmuch about moral hazard concerns, the slowly-emerging shape of Treasury’s plan to … Continue reading →

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Morgan Stanley: Not Out of the Woods

Posted on October 13, 2008 by Felix

Amidst all the enthusiasm about the Dow rising 5% in its opening minutes, it’s worth noting that Morgan Stanley stock is up a disappointing 60%. I’m serious. At $15 a share, Morgan Stanley is still trading at only half its … Continue reading →

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The First Glimmers of Optimism

Posted on October 13, 2008 by Felix

Your daily TED update: 457bp. Just to put things in perspective, a little, on a day when European and — surely — US stock markets are going to rise a lot. But I do think that the optimism (or retreat … Continue reading →

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