US To The Rescue
Yeah, that’s US, as in … us. I like this bailout thing even less now. NYT: Foreign banks lobbied successfully to get in on the big bailout. “It’s a distinction without a difference whether it’s a foreign or a domestic one,” Paulson tells Fox. If that’s the case, then our European pals should all be ready to chip in. Hang on, someone already thought of that. Will the Euros be as eager to help out with the global economy as they are to help with global security? You know, as long as there’s no heavy lifting and there’s a buck in it:
Gaining access to the relief was a top priority for European foreign financial institutions with banking operations in the United States, according to officials in industry and government.
They argued that the reputation of Wall Street and the United States government would suffer immensely if properly licensed foreign banks in the United States were shut out of the system.
“Who would open a bank again in the United States?” asked one executive of a major European bank who has been following the discussions.
At the same time, it was unclear how much European governments would bow to the Treasury Department’s encouragement to set up national programs to deal with their own vast mortgage problems. Real estate markets in Britain, Spain and Ireland have been particularly hard-hit as their own housing market bubbles — which grew in tandem with America’s — have collapsed.
Other governments have struggled to get budget deficits under control in the last few years. The German government, for example, has discouraged talk of a stimulus package, and British officials said Sunday that they were not working on a plan like that of the United States.
Here’s someone who’s optimistic about our friends across the pond:
Robert Kelly, chief executive of the Bank of New York Mellon, said the central bankers around the world would probably be scrutinizing the American bailout proposal. “I would expect every finance minister is looking closely at what is happening in the United States, trying to hypothesize what the impact will be, and is thinking about the tools the Fed and Treasury have used,” he said. “I would not be surprised, and probably expect, some of those tools to be used in Europe as well.”
Be fascinating to see how many come to the conclusion it’s an American problem, and the Americans should pay for it. Sounds like someone diplomatic needs to go over there and administer some traditional American ear twists, dope slaps and eye doiks.
OK, more brain surgery from rocket scientists. Here’s Robert H. Dugger at the Washington Post who’s been down this road before and says, if you’re going to throw massive amounts of taxpayer cash at Wall Street, here are some things to think about. Among, he likes bailing out Euros:
Put individual taxpayers first. The program needs to focus on keeping taxpayers in their homes, strengthening their local economies and protecting their savings. It has to help Americans broadly, not just a few, and certainly not the managers who got us into this mess.
· Minimize taxpayer costs over the long term. Short-term thinking created this crisis. Only long-term efforts will end it. The S&L crisis was limited to the financial sector. It was best addressed on an aggressive basis, bank by bank. This meant that least-cost resolutions were the way to go and that the RTC should buy and sell assets quickly, which it did. But the current situation is systemic. It involves our entire economy. This means the revitalization program should buy distressed assets early and plan to hold them for a long time. The goal is to make the economic adjustment as shallow as possible, to limit the injury to families, jobs, homes and savings.
· Avoid creating an interim program. This program must not be like the S&L “rescues” of the mid-1980s, which merely enabled the problems to grow. The program needs to have the capacity, flexibility and scope to address the vast size of the current crisis. Congress should put no dollar or time limit on our national commitment. Yes, markets will want dollar figures. If numbers must be given, let them be in statements about the program — and let them be big. Do not shy away from saying that the United States is prepared to commit a trillion dollars over the next 10 years to halt this meltdown here and now.
· Remember global investors, whose confidence we must regain. This crisis is an economic heart attack, but not a fatal one. We must assure global investors that we are fully prepared to cover American losses. No one suggests that this will be easy. The budget choices being forced on us will be profoundly difficult. But we have the strongest democracy and the most durable legal and financial systems in the world. We have the capacity to absorb losses and the ability to reshape our economy. Foreign investors need evidence that we are committed to the changes necessary for recovery. When they see that, they will buy our private assets again.
· Do not hesitate. Bill Seidman’s greatest lesson was action. It is far better to deal with a few assets, even without knowing quite what to do, than to do nothing while trying to work out the details. Whoever is in charge of the revitalization program must not hesitate to buy the assets that institutions offer — these will be what is burdening the institutions and clogging our credit system the most. There are many strategies for buying assets and infusing capital that can protect the program from paying too much and ensure that taxpayers benefit from price increases as recovery occurs. The key is to get the assets in-house quickly and learn how to manage them effectively.
Robert Samuelson, RCP, The Great Confidence Game. “It’s about the confidence, stupid.”
Krugman to Congress, don’t get railroaded into paying Cash for Trash.
William Rees-Mogg, Times of London: No one can stop boom-bust, however, you should be more like us.
Meanwhile, NYT: Both candidates on board … and no change in other plank$.
Posted by Jules Crittenden at 9:35 am on Monday, September 22, 2008
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