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[solarbird]

Brad Setzer at the CFR notes that the bailout's window of operations is roughly equal in size to the US current accounts deficit. Hmmmmmmm.

Business Week was asking late last week whether this would hammer the dollar (again). Not in the overnights - not right now, anyway - but over time. Tim Dye is the only economist I've see outside the White House who likes any part of this plan, but even in his view, it won't do anything beyond kick the banking system past the current crisis. Still, he's the one. From his commentary:

My hope is that a bailout is coming. But it will not change the path the economy is already on, it will only prevent activity from shifting to a new, less desirable path. I don’t quite see how the billions of dollars plowed into this program will be funneled to households. I see instead it will only cushion the process of deleveraging, and thus minimize the quantity of resources stripped from the economy. This is important and necessary, but will not provide a miracle cure for the economy’s travails.

Supported the Bailout is a placeholder page set up for political retribution to bailout supporters. The placeholder image is amusing.

Naked Capitalism has more notes about the non-public Treasury conference call, which has of course leaked, describing it as Mussolini-style corporatism in action:

This is simply scandalous. To have a group of interested parties get a privileged briefing by government officials on a matter of keen public interest flies in the face of what a democracy is supposed to be about... But why should I be surprised? Favoritism has been a staple of the Bush Administration. ...

1. The tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed,

2. However, they do not plan any action immediately, will wait a couple of weeks. They want to focus their efforts on stronger companies but also made noise about protecting the financial system. This, by the way, is the Japanese convoy system all over.

3. There seemed to be a lot of tap dancing about what price they will pay for assets and no straight answer about their policy on warrants. They did say that if the amount sold was greater than $100 million, they would take warrants. FYI, the current draft allows them to pay up to the price at which the assets were initially booked (yikes).

... Update ...

2) Waiting a couple of weeks because no one has any idea when or where the next bomb will blow up. In other words, all their doomsday scenarios about Black Monday were B.S. They screamed the check had to be written by Monday, but now they're saying they actually have a few weeks before they need to cash it. Plus, this will allow them to "seek guidance" from GS, JPM, and other selfless public servants about where the money should be funneled.

3. The tap dancing is because they don't want it to get out that they'll be giving a sweetheart deal. The public won't be following each individual transaction to see exactly what price is being paid. So ridiculously overpriced asset sales can be hidden in the details, and by the time some reporter (or blogger :-) combs through and analyzes the transactions, the deed will have been done. But if Paulson makes a statement that assets will be bought at par before the bailout's even begun, that will be reported and might kill the deal.

...

Clawback of taxpayer losses:
1. it's a long way out, "a lot can happen in that time"
2. it's targeted at all financial institutions, not just participants! (that means it will never happen)
3. would need more congressional and presidential action to implement this.

There's lots more, go read.

Comments

[mundivagant.livejournal.com]

Out of curiosity: In your opinion, is there *any* viable solution to the economic crisis?

[solarbird]

It's too late for me to go into all of it again, but I've talked about this some in the past. We're going to have a sucky recession; there's no way around that. The question is whether there will be huge looting on the way down, and how far down you have to go. The key thing to tackle in the interbank lending situation is to achieve restoration of interbank trust, which means restoration of banking transparency, which this will not achieve. This is just looting.