What happened to the global economy and what we can do about it
Search Results for: PPIP
By James Kwak A couple of weeks ago, Yves Smith picked up on the story that the TARP Special Inspector General is investigating suspicious trades in connection with the Public-Private Investment Program. When PPIP was announced almost a year ago, there was widespread speculation about how banks and other private investors could take advantage of … Continue reading Gaming the PPIP?
By James Kwak That’s what Jesse Litvak’s lawyer said at the start of his trial earlier today. And technically speaking, it’s true. If you’re trying to sell a bond to a client, and during the course of the conversation you say you can bench press 250 pounds when you can only bench 150, that’s not … Continue reading “Telling a lie does not make you guilty of a federal crime”
By James Kwak Five years ago, Lehman brothers went bankrupt, AIG was nationalized, Ben Bernanke stared into an abyss, and Mohamed El-Erian asked his wife to take out as much cash from the ATM as she could. And Simon and I started blogging. I already wrote my anniversary reflections on the financial crisis for The … Continue reading Five Years Later
By Simon Johnson It would be easy to take relatively cheap shots at the portrayal of Tim Geithner — “we saved the economy but kind of lost the public doing it” — in the New Yorker, out today. Mr. Geithner is quoted as saying, “Some on the left have fallen into a trap set by … Continue reading They Saved the Big Banks But Kind Of Lost The Economy Doing It
Ben Bernanke is Person of the Year. Matt Yglesias has criticism, although he does say it was an appropriate choice. Now, the Time award is meant to recognize newsworthiness, not necessarily exceptional conduct, and it’s hard to deny that Bernanke has been newsworthy. But I think that 2008 was Bernanke’s year, not 2009–that was the … Continue reading Move Over, Bernanke
Andrew Ross Sorkin’s Too Big to Fail sure is a page-turner; even for events that I already knew about in general, it’s full of new details and juicy quotations. For example, on page 508 it lays out the details of Warren Buffett’s October 2008 proposal for a “Public-Private Partnership Fund,” which would eventually become the … Continue reading Buffett and Geithner
Testimony submitted to the Congressional Oversight Panel, hearing on “The overall impact of the Troubled Asset Relief Program (TARP) on the health of the financial system and the general U.S. economy,” Thursday, November 19, 2009. (pdf version) Submitted by Simon Johnson, Ronald Kurtz Professor of Entrepreneurship, MIT Sloan School of Management; Senior Fellow, Peterson Institute … Continue reading Written Testimony Submitted To The Congressional Oversight Panel
PPIP finally launches, Mike Konczal lays bare the subsidy, everyone just move along … hey, wait a second! From the Times article: “[FDIC] officials announced that they had reached a deal to sell $1.3 billion in mortgages from Franklin Bank, a Houston-based lender that failed last November and was taken over by the F.D.I.C.”
This fall I am taking a course on the “international financial crisis” taught by Jon Macey and Greg Fleming (yes, the former COO of Merrill Lynch). The first assigned reading is a speech that Larry Summers gave at the AEA in 2000 entitled “International Financial Crises: Causes, Prevention, and Cures,”* summarizing the state of the … Continue reading Larry Summers on Preventing and Fighting Financial Crises
In mid-March, the administration proposed that toxic assets could and would be safely removed from banks balance sheets. We were skeptical, and the the PPIP now seems to have slipped into irrelevance (loans; securities). But the administration still put an impressive effort into persuading independent analysts, and broader public opinion, that they should do something clearly beneficial for banks. … Continue reading Waiting For The Big Push: Selling The Consumer Protection Agency For Financial Products
Noam Scheiber at The New Republic has the inside scoop (hat tip Ezra Klein) on why Treasury is letting the Public-Private Investment Program die a quiet death (although at this point the legacy securities component may still go ahead). In short, the argument is that the point of PPIP was to help banks raise capital … Continue reading The Two Sides of the Balance Sheet
In most societies it is traditional to be somewhat sneaky in squeezing your shareholders or the government. You might set up a complicated transfer pricing scheme or perhaps you arrange for a family-owned firm to acquire assets on the cheap from the publicly traded corporation that you control. Or you could always arrange for the … Continue reading Brazen Tunneling and Inflation
From the headlines of the Wall Street Journal: “Banks Aiming to Play Both Sides of Coin — Industry Lobbies FDIC to Let Some Buy Toxic Assets With Taypayer Aid From Own Loan Books (subscription required, but Calculated Risk has an excerpt). I thought the headline had to be a mistake until I read the article. To … Continue reading Banks Want Government Subsidies to Buy Assets from Themselves
The post was co-authored by Simon Johnson and James Kwak. When the stress tests were first announced on February 10, bank stocks went into a slide (the S&P 500 Financial Sector Index fell from 133.13 on February 9 to 96.18 two weeks later), in part on fears that the stress tests would be a prelude … Continue reading Stress Tests and The Nationalization We Got
I’ve been writing a lot about the game of chicken recently, most often in connection with the GM and Chrysler bailouts. On the Chrysler front, the game is in its last hours. Even after a consortium of large banks agreed to the proposed debt-for-equity swap, some smaller hedge funds are holding out for more money, … Continue reading The Importance of Battlefield Nuclear Weapons
The Baseline Scenario 