1) A review of Fool's Gold by Gillian Tett - about J.P. Morgan's creation of credit derivatives and the ensuing chaos.
The final third of the book alone is worth the price of admission, if only as a crib sheet for the events of the last two years. Tett does the best job I’ve seen of reconstructing the drama of the meltdown. Reading through it is a useful reminder of how close we came to an utter cataclysm. After the Bush administration disastrously let Lehman Brothers fail, it had the sense to prop up AIG and get into the bailout business, however clumsily. Tett quotes one senior banker in London, speaking before it was clear what steps the administration would take: “If this continues, the next logical step is that the cash eventually stops coming out of the ATM machines—if that happens, God help us all.”
2) David Leonhardt's rejoinder to the knee-jerk health care soundbite of "rationing"
In truth, rationing is an inescapable part of economic life. It is the process of allocating scarce resources. Even in the United States, the richest society in human history, we are constantly rationing. We ration spots in good public high schools. We ration lakefront homes. We ration the best cuts of steak and wild-caught salmon.
[snip]
The choice isn’t between rationing and not rationing. It’s between rationing well and rationing badly.
and
3) The Economist, for reminding us that when we review the recent history of the financial crisis, we would do well to jealously guard the historical record (and refer to it often). The banks would rather you believe they never needed government help, and that is-
...[w]rong, because in the depths of the crisis the share prices and borrowing costs of all banks indicated an almost complete collapse in confidence. Some firms did perform better than others, but only relatively so. All the banks benefited from an implicit state guarantee. Even those lenders who never got capital would probably not have survived without government rescues of weaker firms to which they had counterparty exposures.
1 comment:
Turned off NPR yesterday as they had someone on spouting that BS rationing line, good to see it refuted, at least in the Times.
Read the Gawande article in the New Yorker if you haven't.
On the banks, let us not forget that there are still TRILLIONS of dollars of various programs that the 'banks' are still using, such as TALF, TAF, TLGP, TPP, MMIFF, TSLF...
Not to mention borrowing at .25% interest rate. The only reason for a bank not to be profitable now is because they lent money poorly, and should probably have gone under, the hazard of lending poorly.
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