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Category Archives: bailouts
Oh Shit
The bailout act has just failed to pass the House, getting only 202 of the required 218 votes. This is what happens when you have a free-rider problem: it’s in Congress’s collective interest to pass the unpopular act. But if … Continue reading
Where Will Treasury Find Its Model?
Steve Hsu has some ideas on how Treasury’s reverse auction might work; a new paper from NERA also considers the practicalities. The big question, of course, is how on earth one goes about valuing unique and hard-to-understand MBSs, CDOs, CDOs … Continue reading
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How to Rescue a Bank
What’s the best way to rescue a failing bank? Bear Stearns got bought by JP Morgan with the help of a $29 billion Treasury backstop. Northern Rock was nationalized. Lehman Brothers was allowed to fail outright, enter bankruptcy, and eventually … Continue reading
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Flow Chart of the Day
Zubin’s flow chart of the Palin Economy: As Zubin says, Not only will the bailout help us with the overall economy, but we’ll also improve health care, jobs, trade, the budget, AND the tax system. And one other thing, too: … Continue reading
The Calm Before the Storm?
It’s definitely not just stocks: the credit markets have failed to deteriorate today as everybody expected them to, on the day after the largest banking collapse in US history. Libor’s down a little, TED’s down a lot, and generally there’s … Continue reading
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Bailout Talks Lose Sight of Cost Question
Andy Kessler reckons that if the government buys up bad loans at 35 cents on the dollar and eventually receives 50 cents for them, it could make well over $1 trillion on this bailout. I’m not sure how that works: … Continue reading
How to Get the House Republicans On Board
Is this elegant, or simply disingenuous? There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done. The legislative process is sometimes not very pretty, but we are going to get … Continue reading
When it Rains, it Pours
This is really, really bad. In a nutshell: the bailout package, which everybody thought was a done deal, has been undone by some combination of Republican recalcitrance and the heat of the presidential campaign. At the same time, WaMu’s gone … Continue reading
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The Bailout Arrives
McCain returning to Washington to work on the bailout? Unhelpful — and, in fact, he’s still in New York, at the Clinton Global Initiative, he hasn’t even gotten started on his legislative work yet. But McCain announcing that he was … Continue reading
Who Will Manage the Bailout Fund?
The jockeying for who is going to get the mandate to run the government’s bailout fund has begun in serious. Bill Gross, giving an interview to the NYT, says he’ll do it for free — which doesn’t mean he wouldn’t … Continue reading
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Didn’t Panic
I was right about what Bush was going to say, but I was wrong about how he said it. This was one of the best speeches of his presidency, if not the best. I was watching in a noisy bar, … Continue reading
The Bailout’s Auction Design: How About a Market?
Ben Bernanke and Hank Paulson spent a bit of time yesterday talking, in pretty vague terms, about auction design and how important it would be to any eventual bailout mechanism. The idea is pretty simple: assume argumento that "fundamental" prices … Continue reading
Answers for David Cay Johnston
David Cay Johnston has a long list of questions; let me see if I can provide a few answers. Ask this question — are the credit markets really about to seize up? They already have seized up. That’s the problem. … Continue reading
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Does Paulson’s Lie Matter?
Paul Krugman today catches Hank Paulson in a lie (chapter and video and verse at Think Progress). Does this mean that Paulson is Not To Be Trusted? That’s what Krugman thinks: If Paulson can’t be honest about what he himself … Continue reading
Bernanke Gives Up on Reverse Auction Idea
Maybe the bailout won’t be structured as a reverse auction after all. This comes from Ben Bernanke, testifying to Congress today: "I believe that under the Treasury program, auctions and other mechanisms could be designed that will give the market … Continue reading
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Can Hank Paulson Lead?
I’m not particularly fluent in the language of political theater, but I get two clear messages from today’s testimony. Paulson is the grown-up, telling Congress what to do: I need literally unimaginable sums of money, he’s saying, because everything we’ve … Continue reading
Abstract of the Day, Ponzi Scheme Edition
The Optimal Design of Ponzi Schemes in Finite Economies, by Utpal Bhattacharya, in the Journal of Financial Intermediation, January 2003: As no rational agent would be willing to take part in the last round in a finite economy, it is … Continue reading
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