Comments on: Why Fiscal Stimulus Is Not Enough

By: Eric Rasmusen

Eric Rasmusen — Wed, 11 Feb 2009 13:29:13 +0000

Hi. I’m in search of academic economists who support the stimulus bill, in any form close to what is going on in Congress. I find it hard to find any in the blogosphere. I’ve searched a few weeks of your posts, and I can’t tell if any of you support it or not. I know you support massive banking intervention, but that’s quite a different matter.

Can I pin you down?

ERic Rasmusen, Dept. of Bus. Econ. and Pub.Pol. , Indiana

By: Mark A. Sadowski

Mark A. Sadowski — Sun, 18 Jan 2009 03:51:02 +0000

Although the news on the TED spread is encouraging the news on CDS spreads cancels it out. My intuition tells me that the decline in stock market volatility (one of many proxies) is short lived and that uncertainty will raise its ugly head again. In short this may not be the end but only the end of the beginning.

By: Mike Laird

Mike Laird — Thu, 15 Jan 2009 00:26:06 +0000

When Bernanke says “more capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets”, and Paulson asks for the next $350 B in bail-out funds, the obvious questions are which banks are in trouble, how much capital is needed to restore them to solvency, and what policy/regulatory action is necessary so that this never happens again. The returning smell of smoke is real. Its hard to believe these are casual, co-incident comments.

By: links for 2009-01-13 at DeStructUred Blog

links for 2009-01-13 at DeStructUred Blog — Wed, 14 Jan 2009 02:03:09 +0000

[...] Why Fiscal Stimulus Is Not Enough (tags: finance crisis blog) [...]

By: engineer27

engineer27 — Tue, 13 Jan 2009 21:03:51 +0000

It sounds like you are saying that the original TARP plan was the right one (after you argued vociferously in favor of the recapitalization that was ultimately pursued).
In fact, as we see now, both were probably needed. The recap was needed to avoid the imminent crisis, while the asset purchase gets to the underlying structural problem. The only issue is whether $750 bln was enough for both — Simon seems to say “no.”

On a related topic, since the government appears ready to place itself in the position of restructuring the mortgage debt of the US homeowner, it makes sense that the same government should hold the risk/benefit of that restructuring. Looked at that way, the Troubled Asset Purchase auction ought to be the perfect remedy. It would forestall lots of the lawsuits by bondholders that object to the loan workouts. Treasury would essentially hold all the cards, and could maximize the value of its newly acquired “assets.”