Category Archives: fiscal and monetary policy

Hank Paulson, Revisionist

Did you know that Hank Paulson is one of the most powerless finance ministers in the world? While his counterparties in other countries feel responsible for saving systemically-important banks, Paulson’s hands, until recently, were tied, and he could do nothing … Continue reading

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Ben Bernanke, Revisionist

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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Paulson’s Failure

Why am I not reassured by Hank Paulson’s latest press conference? "We’re going to do it as soon as we can do it and do it properly and do it effectively and right," Paulson said. "Trust me, we are not … Continue reading

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Recapitalization and the Implicit Treasury Guarantee

Tyler Cowen has a very good question: Treasury equity is not the same as debt to the Fed, but are they so different? In some ways the Fed’s I-can’t-just-stop-rolling-it-over-when-I-want contribution is a bit like preferred equity. I think main key … Continue reading

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The Guarantee Plan

The bad news is that Hank Paulson seems to have run out of ideas. The good news is that, with no bright ideas of his own, he’s turning to the bright ideas of Gordon Brown: first direct equity injections into … Continue reading

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Should the Fed Target Libor?

Many thanks to Colin Barr, who saw my question about how we can bring down Libor and pointed me to a recent essay by Edwin Truman with a very specific proposal about doing just that. Truman takes the very direct … Continue reading

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How Much Will a Wells-Wachovia Deal Cost Taxpayers?

Anybody following the fight between Citi and Wells Fargo has to read Binyamin Appelbaum’s front-page piece in the Washington Post on the tax assumptions behind the Wells Fargo offer. In touting the deal, Wells Fargo executives said they did not … Continue reading

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Iceland: When Too Big To Fail Becomes Too Big To Rescue

We know that credit ratings agencies made enormous errors over the past few years when it came to rating structured products. And of course it’s never easy to rate leveraged institutions, like banks, which are susceptible to runs. But what … Continue reading

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Sell Signal of the Day, Greenspan Edition

Alan Greenspan’s calling a bottom: Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover "sooner rather than later" from the worst turmoil in seven decades. "Trust will eventually reemerge as investors dip hesitantly back into … Continue reading

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Should the Bailout Reduce Other Government Spending?

The most annoying part of the first presidential debate, for me, was when the moderator, Jim Lehrer, asked the same question three times. Basically, he said that if you’re spending $700 billion on a financial bailout, then you’re going to … Continue reading

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Should Paulson’s Fund Welcome Outside Investors?

Here’s an idea I probably haven’t thought through properly, but shouldn’t outside investors be not only allowed but welcome in the new fund being set up by Hank Paulson? The fund is, after all, a distressed-debt fund at heart, and … Continue reading

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The Bumpy Ride Ahead

Dealbreaker has a most germane chart of what happened when Pakistan banned short selling: a brief and large rally, followed by a slow and devastating collapse. Could the same thing happen with the US stock market? Absolutely, yes. Banning short-selling … Continue reading

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Getting Through the Weekend

The latest move in the fiscal and monetary response to the global financial crisis has been to flood the world with money. The Fed boosted its U.S. dollar swap line with foreign central banks by $180 billion…. The Fed also … Continue reading

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America’s Ad Hoc Fiscal and Monetary Policy

What is this Supplementary Financing Program, under which Treasury is essentially lending money to the Fed? Does it mean that the Fed’s run out of money, as Paul Murphy would have it? Does it mean, pace Tyler Cowen, that central … Continue reading

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Libor + 850bp

It’s done. The US government is bailing out AIG to the tune of $85 billion. But boy is it an expensive loan: Interest will accrue on the outstanding balance at the three-month London interbank offered rate plus 8.5 percentage points. … Continue reading

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Why Treasury Shielded Frannie’s Sub Debt

Yet another peculiarity of the credit crunch: the WSJ editorial page seems to be in full agreement with Nouriel Roubini. The subject: Frannie’s sub debt, which was shielded from any haircut by Hank Paulson’s bailout. In structuring his rescue, Treasury … Continue reading

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Trusting Uncle Sam

Arnold Kling has a cute response to my blog entry on the Social Security trust fund: A trust fund = an obligation to borrow? If your uncle Louie told you he was setting up a trust fund for you, and … Continue reading

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How to Think about the Social Security Trust Fund

If you want to start a heated debate among policy wonks, just ask them about the Social Security trust fund. A large contingent of people will tell you that it’s real government debt; another large contingent will tell you that … Continue reading

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Drilling for Revenues

Free Exchange has it right, I think, and Tyler Cowen is being needlessly self-abnegating. Drilling for US oil might well make sense as a matter of fiscal policy, especially for Alaska; it gets us nowhere fast as a an "energy … Continue reading

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$250,000 per Year Counts as Rich

Slate’s Moneybox column is mostly home to Dan Gross, but occasionally other people write for it too. Back in May, it was fine for Sam Grobart and Tara Siegel Bernard to write that "for a family of four living in … Continue reading

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Barack Obama, Economic Policy Wonk

David Leonhardt has a must-read piece on Barack Obama’s economic policy in this weekend’s NYT Magazine. It’s long (over 8,000 words), and even so it doesn’t tease out all the implications of, say, Obama’s 100%-auction cap-and-trade system on US fiscal … Continue reading

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Why Greenspan Won’t Shut Up

Welcome, Caroline Baum, to the please-Mr-Greenspan-shut-up society. There is something unseemly about Greenspan’s conduct. Former presidents don’t criticize U.S. foreign policy during times of war, Jimmy Carter notwithstanding. The same unspoken rule should apply to economic policy… So here’s my … Continue reading

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Incentives for Inflation

Steve Waldman explains that America’s net-debtor position (both at the sovereign and at the individual level) means that there’s a lot of pressure towards inflation: Inflation helps debtors at the expense of creditors. In democracies where those who can vote … Continue reading

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Laughing at Alan Greenspan

I’m no big fan of Alan Greenspan or his pronouncements, especially those where he tries to persuade us that he wasn’t wrong in the past, he was right. There’s a classic example in his latest interview with David Wessel: In … Continue reading

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Please, Mr Greenspan, Shut Up

If ever there was a need for gag orders on former central bank chairmen, it is now. Actually, scrap that: if ever thre was a need for a gag order on Alan Greenspan, it is now. The rest of them … Continue reading

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