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Where there's a bill, there's a horse
Sep. 22nd, 2008 07:13 amSo, it was all Lehman's fault after all. Information filtering through shows that the Fed, having decided to allow Lehman to fail on the grounds that it had no direct connection to the retail market and therefore the man in the street would not be immediately affected, suddenly found that Lehman's failure threatened AIG. Shock, the two markets are connecteded! Oh-My-God Why-Werent-We-Told?
(I typed about 800 words and LiveJounral lost it after I tried to upload it, and I haven't got time to type it again, so this is a brief resumé).
Meanwhile in Washington the Democrats have said that, if they are to sign a bill that bails out the banks, they want to bail out distressed homeowners who borrowed too much at too low a temporary rate to buy overpriced properties. Clearly they think (probably correctly) that Paulson is so desperate to get the rescue measure through that he will accept any number of "additions" to help out special interest groups. The net result could be that more long-term problems are created than short-term problems are fixed.
Bush gave a speech saying "The experts have told me that the consequences of inaction are worse than the consequences of action". It really was touching.
Mickey Clark on Wake Up To Money asked an American Analyst a great Emperor-Has-No-Clothes question.
"This bail-out is being funded by the issue of US treasuries in $50bn slabs. That's an awful lot of Treasuries" (said our Mickey
"I think you will find that there's buyers out there", responded our US analyst.
"Who? The Chinese?"
A poignant pause. "I think there's sufficient appetite for US bonds".
All that has happened is that the US government has taken on the role of AIG -- the guaranteed risk-free investment. But, as we saw with AIG, no triple A rating is sacrosanct. Whether or not the US can take on the strain of an 8% short-term additional loading to the budget deficit is an interesting point of debate. I think that it probably can. But what worries me is that no-one in the US, including the analysts whose job it is to understand this point, seems to be asking that question... Then again, they didn't ask it about AIG, either.
___________
(I typed about 800 words and LiveJounral lost it after I tried to upload it, and I haven't got time to type it again, so this is a brief resumé).
Meanwhile in Washington the Democrats have said that, if they are to sign a bill that bails out the banks, they want to bail out distressed homeowners who borrowed too much at too low a temporary rate to buy overpriced properties. Clearly they think (probably correctly) that Paulson is so desperate to get the rescue measure through that he will accept any number of "additions" to help out special interest groups. The net result could be that more long-term problems are created than short-term problems are fixed.
Bush gave a speech saying "The experts have told me that the consequences of inaction are worse than the consequences of action". It really was touching.
Mickey Clark on Wake Up To Money asked an American Analyst a great Emperor-Has-No-Clothes question.
"This bail-out is being funded by the issue of US treasuries in $50bn slabs. That's an awful lot of Treasuries" (said our Mickey
"I think you will find that there's buyers out there", responded our US analyst.
"Who? The Chinese?"
A poignant pause. "I think there's sufficient appetite for US bonds".
All that has happened is that the US government has taken on the role of AIG -- the guaranteed risk-free investment. But, as we saw with AIG, no triple A rating is sacrosanct. Whether or not the US can take on the strain of an 8% short-term additional loading to the budget deficit is an interesting point of debate. I think that it probably can. But what worries me is that no-one in the US, including the analysts whose job it is to understand this point, seems to be asking that question... Then again, they didn't ask it about AIG, either.
___________
