France will pay out €20 billion to protect its key industries in the wake of the global financial crisis via the creation of a strategic investment fund - the country's first sovereign wealth fund, French President Nicolas Sarkozy said on Thursday (20 November). Following up on his idea first brought up three weeks ago to protect French businesses from "foreign hands," Mr Sarkozy also announced the new fund's first €80 million investment would go to industrial supplier Daher, which works in the aerospace, defence, nuclear and automotive industries. Mr Sarkozy does not want France transformed into "a simple tourist reserve." According to the French president, firms that have "competences, technologies and jobs that are irreplaceable for the national territory" qualify as "strategic" ones and deserve special treatment. "The day we don't build trains, aeroplanes, automobiles and ships, what will be left of the French economy? Memories. I will not make France a simple tourist reserve," he said.
France will pay out €20 billion to protect its key industries in the wake of the global financial crisis via the creation of a strategic investment fund - the country's first sovereign wealth fund, French President Nicolas Sarkozy said on Thursday (20 November).
Following up on his idea first brought up three weeks ago to protect French businesses from "foreign hands," Mr Sarkozy also announced the new fund's first €80 million investment would go to industrial supplier Daher, which works in the aerospace, defence, nuclear and automotive industries.
Mr Sarkozy does not want France transformed into "a simple tourist reserve."
According to the French president, firms that have "competences, technologies and jobs that are irreplaceable for the national territory" qualify as "strategic" ones and deserve special treatment.
"The day we don't build trains, aeroplanes, automobiles and ships, what will be left of the French economy? Memories. I will not make France a simple tourist reserve," he said.
The current financial crisis has some German experts worried about a cut in renewable energy funds. But industry professionals say that no matter which way the wind turns, the turbine blades will keep churning. Skyrocketing oil prices and a greater attention to the problems created by greenhouse gases has helped the renewable energy market in Europe to boom over the last decade. Thanks to strict government regulations in Germany and lofty goals for cutting carbon emissions across the EU, solar and wind technologies have seen over a decade of innovation and created a new, profitable market. According to the market research company New Energy Finance, 2007 saw worldwide investments in clean energy climb to $148 billion (118.2 billion euros). Now with banks' money woes seeping into nearly every industry, some say that investors' love affair with renewable energies may be ending and Germany's place as an industry leader is threatened.
Skyrocketing oil prices and a greater attention to the problems created by greenhouse gases has helped the renewable energy market in Europe to boom over the last decade. Thanks to strict government regulations in Germany and lofty goals for cutting carbon emissions across the EU, solar and wind technologies have seen over a decade of innovation and created a new, profitable market.
According to the market research company New Energy Finance, 2007 saw worldwide investments in clean energy climb to $148 billion (118.2 billion euros).
Now with banks' money woes seeping into nearly every industry, some say that investors' love affair with renewable energies may be ending and Germany's place as an industry leader is threatened.
Everyone's talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters' minds, both discredited the G.O.P.'s free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum, these are hopeful times. There is, however, another and more disturbing parallel between 2008 and 1932 -- namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.It's true that the interregnum will be shorter this time: F.D.R. wasn't inaugurated until March; Barack Obama will move into the White House on Jan. 20. But crises move faster these days. How much can go wrong in the two months before Mr. Obama takes the oath of office? The answer, unfortunately, is: a lot. Consider how much darker the economic picture has grown since the failure of Lehman Brothers, which took place just over two months ago. And the pace of deterioration seems to be accelerating.Most obviously, we're in the midst of the worst stock market crash since the Great Depression: the Standard & Poor's 500-stock index has now fallen more than 50 percent from its peak. Other indicators are arguably even more disturbing: unemployment claims are surging, manufacturing production is plunging, interest rates on corporate bonds -- which reflect investor fears of default -- are soaring, which will almost surely lead to a sharp fall in business spending. The prospects for the economy look much grimmer now than they did as little as a week or two ago.
Everyone's talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters' minds, both discredited the G.O.P.'s free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum, these are hopeful times.
There is, however, another and more disturbing parallel between 2008 and 1932 -- namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.
It's true that the interregnum will be shorter this time: F.D.R. wasn't inaugurated until March; Barack Obama will move into the White House on Jan. 20. But crises move faster these days.
How much can go wrong in the two months before Mr. Obama takes the oath of office? The answer, unfortunately, is: a lot. Consider how much darker the economic picture has grown since the failure of Lehman Brothers, which took place just over two months ago. And the pace of deterioration seems to be accelerating.
Most obviously, we're in the midst of the worst stock market crash since the Great Depression: the Standard & Poor's 500-stock index has now fallen more than 50 percent from its peak. Other indicators are arguably even more disturbing: unemployment claims are surging, manufacturing production is plunging, interest rates on corporate bonds -- which reflect investor fears of default -- are soaring, which will almost surely lead to a sharp fall in business spending. The prospects for the economy look much grimmer now than they did as little as a week or two ago.
The number of indicators pointing to foul economic weather continues growing. A new index released on Friday testifies to increasingly empty order books. Experts predict that over 200,000 jobs are at risk. ANZEIGE var qcPage="www.spiegel.de/international/artikel"; if (qcPage.indexOf("center")==-1) { document.write(''); } The more economic data comes in, the worse the coming recession appears likely to be. According to a key German economic climate index released on Friday, industry in Germany is facing a difficult road ahead. The index, which measures the economic health of producers in Germany as well as the amount of orders they are receiving, dropped unexpectedly sharply in November relative to its already low October level. It now stands at 36.2, much lower than the 40.5 level many had expected, according to a Reuters survey. Much of that drop comes as a result of a sharp falloff in exports, a branch that had much of the work in keeping the German economy humming in recent years. The news comes on the heels of Thursday's announcement that the Ifo global business sentiment index dropped to its lowest level in 20 years. The index fell from an October level of 73.4 to November's 60.0.
The number of indicators pointing to foul economic weather continues growing. A new index released on Friday testifies to increasingly empty order books. Experts predict that over 200,000 jobs are at risk. ANZEIGE var qcPage="www.spiegel.de/international/artikel"; if (qcPage.indexOf("center")==-1) { document.write(''); }
The more economic data comes in, the worse the coming recession appears likely to be. According to a key German economic climate index released on Friday, industry in Germany is facing a difficult road ahead. The index, which measures the economic health of producers in Germany as well as the amount of orders they are receiving, dropped unexpectedly sharply in November relative to its already low October level. It now stands at 36.2, much lower than the 40.5 level many had expected, according to a Reuters survey.
Much of that drop comes as a result of a sharp falloff in exports, a branch that had much of the work in keeping the German economy humming in recent years.
The news comes on the heels of Thursday's announcement that the Ifo global business sentiment index dropped to its lowest level in 20 years. The index fell from an October level of 73.4 to November's 60.0.
Amid a debt-deflation spiral, the governments' greatest risk is enacting stimulus measures that are too little to fight the slump. For more than six decades, through oil shocks and terrorist attacks, the world's advanced economies have managed to expand their collective output at least a little bit each year. But that long lucky streak is probably about to end, a victim of the severe global credit crunch. The International Monetary Fund is now projecting that 2009 will bring the first aggregate decline in economic output in advanced economies since at least World War II.Going down. The IMF still expects China and other developing nations to grow next year as a group, but it warns that "downside risks to growth, even for the emerging economies, remain significant." Some economists are even gloomier. "There is a very severe deleveraging which you can't stop," says Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington. "My guess is that (even) if we have good economic policies, the world will see a (gross domestic product) fall of 10 percent... . This is global, and it's fierce." Even if things don't get that bad, it's clear that we're deep in uncharted territory -- or at least territory that hasn't been explored since the Great Depression. Economists and policymakers are floundering. Since they don't know how severe the recession will be, they don't know how extreme their measures to combat the downturn should be. US Treasury Secretary Henry Paulson, who has struggled to find a path for American policy, defended himself in a Nov. 18 op-ed article in The New York Times, saying: "There is no playbook for responding to turmoil we have never faced."
Amid a debt-deflation spiral, the governments' greatest risk is enacting stimulus measures that are too little to fight the slump.
For more than six decades, through oil shocks and terrorist attacks, the world's advanced economies have managed to expand their collective output at least a little bit each year. But that long lucky streak is probably about to end, a victim of the severe global credit crunch. The International Monetary Fund is now projecting that 2009 will bring the first aggregate decline in economic output in advanced economies since at least World War II.
Going down. The IMF still expects China and other developing nations to grow next year as a group, but it warns that "downside risks to growth, even for the emerging economies, remain significant." Some economists are even gloomier. "There is a very severe deleveraging which you can't stop," says Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington. "My guess is that (even) if we have good economic policies, the world will see a (gross domestic product) fall of 10 percent... . This is global, and it's fierce."
Even if things don't get that bad, it's clear that we're deep in uncharted territory -- or at least territory that hasn't been explored since the Great Depression. Economists and policymakers are floundering. Since they don't know how severe the recession will be, they don't know how extreme their measures to combat the downturn should be. US Treasury Secretary Henry Paulson, who has struggled to find a path for American policy, defended himself in a Nov. 18 op-ed article in The New York Times, saying: "There is no playbook for responding to turmoil we have never faced."
Repossessions in July, August and September jumped sharply by 12 per cent and, according to the Council of Mortgage Lenders, full year numbers are expected to soar by 70 per cent compared to 2007. The number of repossessions that took place over the summer was 11,300, as an increasing number of homeowners are struggling to pay their mortgages. Today, the CML maintained its forecast that total repossessions for the year will reach 45,000, marking a 70 per cent increase on last year's total. The latest figures from the CML also show that the number of mortgages in arrears by at least three months had jumped by 8 per cent. The number of cases where people have fallen behind in their mortgage repayments by the end of September was 168,000, with lenders now suggesting that the total number of mortgages in arrears is likely to surpass previous forecasts of 170,000 by the end of the year.
Repossessions in July, August and September jumped sharply by 12 per cent and, according to the Council of Mortgage Lenders, full year numbers are expected to soar by 70 per cent compared to 2007.
The number of repossessions that took place over the summer was 11,300, as an increasing number of homeowners are struggling to pay their mortgages. Today, the CML maintained its forecast that total repossessions for the year will reach 45,000, marking a 70 per cent increase on last year's total.
The latest figures from the CML also show that the number of mortgages in arrears by at least three months had jumped by 8 per cent.
The number of cases where people have fallen behind in their mortgage repayments by the end of September was 168,000, with lenders now suggesting that the total number of mortgages in arrears is likely to surpass previous forecasts of 170,000 by the end of the year.
Latvia has become the second European Union member state forced to seek emergency aid from the International Monetary Fund (IMF) as well as from the EU's own coffers. The move by Riga comes after much speculation by analysts that the Baltic countries and other post-Communist states that joined the EU in 2004 would follow Hungary in needing an external capital boost to weather the financial crisis. Riga's move has prompted speculation as to who will be next to call for an IMF rescue "We have decided to start official talks with the European Commission and the IMF about funding to stabilise the economy," Prime Minister Ivars Godmanis told reporters. The Baltic country has seen a sharp economic slowdown this year, with a contraction of 4.3 percent in the third quarter, breaking its previous record of being one of the fastest growing economies in the EU. The financial crisis has made it hard for Latvia to obtain funds in its attempts to counterbalance its large current account deficit.
Latvia has become the second European Union member state forced to seek emergency aid from the International Monetary Fund (IMF) as well as from the EU's own coffers.
The move by Riga comes after much speculation by analysts that the Baltic countries and other post-Communist states that joined the EU in 2004 would follow Hungary in needing an external capital boost to weather the financial crisis.
Riga's move has prompted speculation as to who will be next to call for an IMF rescue
"We have decided to start official talks with the European Commission and the IMF about funding to stabilise the economy," Prime Minister Ivars Godmanis told reporters.
The Baltic country has seen a sharp economic slowdown this year, with a contraction of 4.3 percent in the third quarter, breaking its previous record of being one of the fastest growing economies in the EU.
The financial crisis has made it hard for Latvia to obtain funds in its attempts to counterbalance its large current account deficit.
EU Competition Commissioner Neelie Kroes has told France and Germany not to start a "subsidy race" with the US to save the car industry. She said the European Union's existing mechanisms could help automakers, hard hit by falling demand. General Motors has been seeking support from the German government for its local subsidiary, Adam Opel GmbH. On Thursday the Congress told US carmakers to present a recovery plan if they want a $25bn (£17bn) rescue. Poorly-handled subsidies would not solve the car industry's problems, Neelie Kroes said.
EU Competition Commissioner Neelie Kroes has told France and Germany not to start a "subsidy race" with the US to save the car industry.
She said the European Union's existing mechanisms could help automakers, hard hit by falling demand.
General Motors has been seeking support from the German government for its local subsidiary, Adam Opel GmbH.
On Thursday the Congress told US carmakers to present a recovery plan if they want a $25bn (£17bn) rescue.
Poorly-handled subsidies would not solve the car industry's problems, Neelie Kroes said.
Citi's Fall Continues as Bank Weighs Options NEW YORK -- Citigroup Inc.'s stock fell as much as 24% Friday to a new 15-year low, as the giant bank's board met to consider its options amid a deepening market rout. Just two months ago, Citigroup was seen as a possible rescuer for a floundering Wachovia Corp. Now the bank, still freighted with troubled assets and facing mounting losses on consumer loans as economies around the world slide into recession, is facing a flight by investors worried it won't be able to stem its losses and turn things around. While some executives are starting to consider contingencies that could involve selling off entire lines of business or even putting the bank itself on the block, the bank continues to insist it has ample capital and its strategic direction is sound.
NEW YORK -- Citigroup Inc.'s stock fell as much as 24% Friday to a new 15-year low, as the giant bank's board met to consider its options amid a deepening market rout.
Just two months ago, Citigroup was seen as a possible rescuer for a floundering Wachovia Corp. Now the bank, still freighted with troubled assets and facing mounting losses on consumer loans as economies around the world slide into recession, is facing a flight by investors worried it won't be able to stem its losses and turn things around.
While some executives are starting to consider contingencies that could involve selling off entire lines of business or even putting the bank itself on the block, the bank continues to insist it has ample capital and its strategic direction is sound.
Argggg, Maties! Here's what shell-shocked financiers are laughing at on Wall Street Friday morning in a phony Bloomberg story: Somali Pirates in Discussions to Acquire Citigroup By Andreas Hippin November 20 (Bloomberg) -- The Somali pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup. The pirates would buy Citigroup with new debt and their existing cash stockpiles, earned most recently from hijacking numerous ships, including most recently a $200 million Saudi Arabian oil tanker. The Somali pirates are offering up to $0.10 per share for Citigroup, pirate spokesman Sugule Ali said earlier today. The negotiations have entered the final stage, Ali said. "You may not like our price, but we are not in the business of paying for things. Be happy we are in the mood tooffer the shareholders anything," said Ali. The pirates will finance part of the purchase by selling new Pirate Ransom Backed Securities. The PRBS's are backed by the cash flows from future ransom payments from hijackings in the Gulf of Aden. Moody's and S&P have already issued their top investment grade ratings for the PRBS's.
Argggg, Maties! Here's what shell-shocked financiers are laughing at on Wall Street Friday morning in a phony Bloomberg story:
Somali Pirates in Discussions to Acquire Citigroup
By Andreas Hippin November 20 (Bloomberg) -- The Somali pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup.
The pirates would buy Citigroup with new debt and their existing cash stockpiles, earned most recently from hijacking numerous ships, including most recently a $200 million Saudi Arabian oil tanker. The Somali pirates are offering up to $0.10 per share for Citigroup, pirate spokesman Sugule Ali said earlier today. The negotiations have entered the final stage, Ali said.
"You may not like our price, but we are not in the business of paying for things. Be happy we are in the mood tooffer the shareholders anything," said Ali.
The pirates will finance part of the purchase by selling new Pirate Ransom Backed Securities. The PRBS's are backed by the cash flows from future ransom payments from hijackings in the Gulf of Aden. Moody's and S&P have already issued their top investment grade ratings for the PRBS's.
President-elect Barack Obama plans to announce his economic team on Monday as part of an effort to reassure markets and will name New York Fed President Tim Geithner his nominee for Treasury Secretary, NBC News has learned... "I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy. There's a little bit of a question because he's associated with the bailout, and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."
"I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy. There's a little bit of a question because he's associated with the bailout, and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."
Can anyone fill in details about his economic ideas? Here's some quotes his Federal Reserve biography:
Timothy F. Geithner became the ninth president and chief executive officer of the Federal Reserve Bank of New York on November 17, 2003. In that capacity, he serves as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy. Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers. He was director of the Policy Development and Review Department at the International Monetary Fund from 2001 until 2003. Before joining the Treasury, Mr. Geithner worked for Kissinger Associates, Inc.
Mr. Geithner joined the Department of Treasury in 1988 and worked in three administrations for five Secretaries of the Treasury in a variety of positions. He served as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Secretaries Robert Rubin and Lawrence Summers.
He was director of the Policy Development and Review Department at the International Monetary Fund from 2001 until 2003. Before joining the Treasury, Mr. Geithner worked for Kissinger Associates, Inc.
The only hope is that they do have some awareness and some plan, but feel that they cannot tip their hand until Jan. 21, because of the delicate psyche of the 'markets'. Personally, I think that that gives them too much credit. In addition, as pointed out above, the U.S. (and other) economy(ies) are likely to look substantially worse in two months, psychologically impaired or not.
At least, I think that the U.S. government will stabilize the domestic automobile industry in December, which may temporarily slow the slide. paul spencer
Not sure it means much, this increase is likely to be cancelled next week depending on what happens to Citi. In the long run, we're all dead. John Maynard Keynes
You have my sympathy. I lost count of FRB credit facilities created since 14 Dec 2008 after No. 8. And since Mr Paulson's annoucement this week that Treasury will not "seek" release of the remaining $350B budgeted, I had looked forward to the remote possibility those funds would be applied by the next administration to "backstop" HH obligations.
Not anymore. For surely Mr Geithner, pres. of FRBNY, knows better than anyone in Congress which financial services firms require additional support of the full faith and credit of US treasuries. As far as I know, no other regional bank (of the TWELVE) serviced proto-TARP or TARP transactions.
17 Nov 2008 US Treasury Transaction Report, broad strokes, that is the First 30 and excluding private equity under management (funds) and industrial firms. NB The Bailout Bill doesn't require detailed (coded) reporting by the Treasury Sec and "Oversight Board" until Q2 2009.
Let us be clear. Mr Geithner will swear an oath the defend the US Constitution and execute fiduciary duties of public debt management. Is he qualified? Is this creature the best qualified to maximize "taxpayer" returns by lending to FRB reserve banks? Diversity is the key to economic and political evolution.
The latest wave of credit market innovations has elicited some concerns about their implications for the stability of the financial system, concerns similar to those associated with earlier periods of rapid change in financial markets. Will the most recent credit market innovations amplify credit cycles, contributing to "excessive" lending in times of relative stability, and then magnify the contraction in credit that follows? Will they introduce greater volatility in financial markets? Will they create greater risk of systemic financial crisis? These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed. As of now, though, there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole. Indeed, economic theory and recent practical experience offer some reassurance against both these specific concerns and more general worries about the implications of credit market innovations for the performance of the financial system.
These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed. As of now, though, there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole.
Indeed, economic theory and recent practical experience offer some reassurance against both these specific concerns and more general worries about the implications of credit market innovations for the performance of the financial system.
And how about?
Credit market innovation does not appear to have resulted in a large increase in leverage in the corporate sector, as some had feared. Indeed, nonfinancial corporate leverage in the United States is currently low by recent historical standards. The overall degree of balance sheet leverage by corporations, for example, is higher in some more traditional financial systems than it is in systems where credit market innovations are more advanced.
With that said, he did see the need for more oversight.
What should policymakers do to mitigate these risks? We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act preemptively to diffuse them. The most productive focus of policy attention has to be on improving the shock absorbers in the core of the financial system, in terms of capital and liquidity relative to risk and the robustness of the infrastructure. These issues are the principal focus of day-to-day supervision and market oversight in the major financial centers around the world. The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.
We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act preemptively to diffuse them.
The most productive focus of policy attention has to be on improving the shock absorbers in the core of the financial system, in terms of capital and liquidity relative to risk and the robustness of the infrastructure.
These issues are the principal focus of day-to-day supervision and market oversight in the major financial centers around the world. The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.
Of course, "a stronger regulatory capital regime" never materialized.
The good news is that he's competent and knows his way around (the people and the numbers). Obama seems to believe he'll do what he tells him to do. We'll all have to wait and see what that actually is.
Obama, remember, is a Democrat. Expect no revolutions.
Reading around a bit, Geithner wouldn't be my first choice. NY Fed chairmen tend to be too plugged into the financial markets, and too separated from the larger economy. But he'll probably do fine. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
This article from The New Republic has probably already been posted here somewhere, but just in case, it has some interesting things to say about the "not just highly competent" Geith vs. the "brilliant" Summers choice:
... Summers's brilliance made him simultaneously exhilarating and exhausting to work for--a whirlwind of intellectual energy fueled by an endless supply of Diet Coke. "I remember once giving him a memo that was three pages long," recalls Steve Radelet, a onetime Harvard economist who worked for both Summers and Geithner. "I'd worked on it for days and days. He read it in a minute and a half. He looked at me, saying, 'I don't agree with your argument. But, if I were making your argument, I could have made it better. Here's how.' " In Geithner, Summers recognized the perfect complement. Geithner was razor-sharp, but had an easy way about him. He was a talented softball player who seemed to glide around the diamond, and his workplace demeanor was similarly effortless. This was particularly handy in navigating the political aspects of the job--not always Summers's strong suit. <...> What Obama thinks of this is an open question. Several Obama insiders told me the senator has warm feelings toward both men. "Put it this way," says one. "They are both highly regarded. Very highly regarded. Very, very highly regarded." It's possible to see Obama's personal biases cutting either way. On the one hand, the president-elect has a well-known dislike of "drama," which could tilt the calculus toward Geithner. On the other hand, Obama has an equally strong preference for expertise, which could favor Summers. Substantively, the differences may be slight. Summers, like Geithner, would likely have preferred more robust action in the case of Lehman Brothers and a more systematic approach to the financial crisis generally. Being less politic by nature, it's possible he would have piped up publicly had he been in Geithner's position, or bent Paulson and Bernanke to his will. But it's also possible that such pressure would have backfired. Markets don't generally respond well to conflict among policymakers. If Summers ends up with the Treasury job, it's more than a little reassuring that he'd still have Geithner at the New York Fed--telling him when he's full of it. Obama's Choice
In Geithner, Summers recognized the perfect complement. Geithner was razor-sharp, but had an easy way about him. He was a talented softball player who seemed to glide around the diamond, and his workplace demeanor was similarly effortless. This was particularly handy in navigating the political aspects of the job--not always Summers's strong suit.
<...>
What Obama thinks of this is an open question. Several Obama insiders told me the senator has warm feelings toward both men. "Put it this way," says one. "They are both highly regarded. Very highly regarded. Very, very highly regarded." It's possible to see Obama's personal biases cutting either way. On the one hand, the president-elect has a well-known dislike of "drama," which could tilt the calculus toward Geithner. On the other hand, Obama has an equally strong preference for expertise, which could favor Summers.
Substantively, the differences may be slight. Summers, like Geithner, would likely have preferred more robust action in the case of Lehman Brothers and a more systematic approach to the financial crisis generally. Being less politic by nature, it's possible he would have piped up publicly had he been in Geithner's position, or bent Paulson and Bernanke to his will. But it's also possible that such pressure would have backfired. Markets don't generally respond well to conflict among policymakers. If Summers ends up with the Treasury job, it's more than a little reassuring that he'd still have Geithner at the New York Fed--telling him when he's full of it.
Obama's Choice
Summers -- again, setting aside the politically stupid things he has said (Summers is a smart guy, but he's the Joe Biden of economists) -- is a bit of a drama queen, and a drama queen is the last thing we need at the Treasury Dept right now, because he'd lend a feeling of chaos to the situation. If you think Bernanke is a drama queen for jumping to the rescue every time there's a hiccup, Summers would make Bernanke look sedated by comparison.
That would be, at best, a serious distraction from getting the agenda through Congress, and, at worst, an Epic Fail. Geithner, by all accounts I've read, is not a drama queen. As an NY Fed guy, like I said, he's too close to the financial markets for me to be fully comfortable, but, given that so much of Treasury's responsibility will involve managing the bailout package, the TreasSec needs to be someone familiar with the markets.
Of all the potential candidates -- those mentioned and those not -- I would've preferred Stiglitz above anybody else. But I know he said he didn't want to return to Washington. Geithner gets good reviews from the people I trust, so I'm satisfied. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
FDIC OKs backing for bank debt, deposits: Financial News - Yahoo! Finance
FDIC approves program to guarantee banks' debt, deposits as part of financial rescue WASHINGTON (AP) -- The FDIC will guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan.The FDIC will provide temporary insurance for loans between banks -- except for those for 30 days or less -- guaranteeing the new debt in the event of payment default by the borrowing bank.The FDIC also will guarantee deposits in non-interest-bearing "transaction" accounts by removing the current $250,000 insurance limit on them through the end of next year. That could add as much as $500 billion to FDIC-backed deposits.The guarantee program has been in effect since Oct. 23. All federally-insured banks and thrifts have been automatically covered since then but will have to decide by Dec. 5 whether to participate or "opt out."Well over half of the roughly 8,500 U.S. banks and savings and loans are expected to tap the FDIC's temporary guarantees, which are in addition to the government's $250 billion program of directly buying shares in banks and financial companies.The FDIC will back new senior unsecured debt that banks issue to each other between Oct. 14 and June 30, 2009. It would be insured by the agency through June 30, 2012. Senior unsecured debt does not have collateral underlying it but must be repaid before other classes of debt.
WASHINGTON (AP) -- The FDIC will guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan.
The FDIC will provide temporary insurance for loans between banks -- except for those for 30 days or less -- guaranteeing the new debt in the event of payment default by the borrowing bank.
The FDIC also will guarantee deposits in non-interest-bearing "transaction" accounts by removing the current $250,000 insurance limit on them through the end of next year. That could add as much as $500 billion to FDIC-backed deposits.
The guarantee program has been in effect since Oct. 23. All federally-insured banks and thrifts have been automatically covered since then but will have to decide by Dec. 5 whether to participate or "opt out."
Well over half of the roughly 8,500 U.S. banks and savings and loans are expected to tap the FDIC's temporary guarantees, which are in addition to the government's $250 billion program of directly buying shares in banks and financial companies.
The FDIC will back new senior unsecured debt that banks issue to each other between Oct. 14 and June 30, 2009. It would be insured by the agency through June 30, 2012. Senior unsecured debt does not have collateral underlying it but must be repaid before other classes of debt.
Hat tip to gjohnsit. "Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
Nov. 21 (Bloomberg) -- Goldman Sachs Group Inc. increased its recession estimates, saying gross domestic product is declining at a 5 percent annual rate in the current quarter and will drop 3 percent and 1 percent in the next two quarters. Unemployment will reach 9 percent by the fourth quarter of 2009, Goldman economists led by Jan Hatzius wrote in a research note today.
Unemployment will reach 9 percent by the fourth quarter of 2009, Goldman economists led by Jan Hatzius wrote in a research note today.
(Via CR.)
Scary numbers.
Krugman also noted today that yields on the 3-month Treasuries hit .02% today.
Krugman and DeLong are both pleased with the economics-related appointments -- Geithner at Treasury and Orszag at OMB -- Obama has made so far. At least there's that, I guess, but it'd sure be nice if we could move the inauguration up to, like, Monday. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
Ecuador audit advises default on 40% of foreign debt. Jeanneth Valdivieso, AP AR Democrat Gazette, 11-21-'08 (link unavailable) QUITO, Ecuador--A presidential commission recommended Thrusday that Ecuador default on almost 40% of its foreign debt after finding "illegalities and ilegitimacies" in the contracts. President Rafael Correa said he would seek to halt payment on those debts and hold foreign investment banks and ex-government officials responsible, but fell short of declaring a default. An audit made public Thursday advises Correa's government to default on $3.9 billion in three types of bonds issued as part of a debt restructuring in 2000. It says the negotiations lacked transparency and caused "incalculable" damage to Ecuador's economy. The report also accuses former Ecuadoran officials and investment bankds including U.S. based J.P. Morgan and Salomon Smith Barney, now part of Citigroup, of profiting from the restructuring.
QUITO, Ecuador--A presidential commission recommended Thrusday that Ecuador default on almost 40% of its foreign debt after finding "illegalities and ilegitimacies" in the contracts.
President Rafael Correa said he would seek to halt payment on those debts and hold foreign investment banks and ex-government officials responsible, but fell short of declaring a default.
An audit made public Thursday advises Correa's government to default on $3.9 billion in three types of bonds issued as part of a debt restructuring in 2000. It says the negotiations lacked transparency and caused "incalculable" damage to Ecuador's economy.
The report also accuses former Ecuadoran officials and investment bankds including U.S. based J.P. Morgan and Salomon Smith Barney, now part of Citigroup, of profiting from the restructuring.
With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company's executives on Friday entered into talks with federal officials about how to stabilize the struggling financial giant. In a series of tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup's chief executive, Vikram S. Pandit, or sell all or part of the company. Other options discussed included a public endorsement from the government or a new financial lifeline, people involved in the talks said. The course of action, however, remained uncertain on Friday night, these people said, and other options may yet emerge. But after a year of gaping losses and an accelerating decline in share price, Citigroup, which has $2 trillion in assets and operations in scores of countries, is running out of time, analysts said.
In a series of tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup's chief executive, Vikram S. Pandit, or sell all or part of the company.
Other options discussed included a public endorsement from the government or a new financial lifeline, people involved in the talks said.
The course of action, however, remained uncertain on Friday night, these people said, and other options may yet emerge. But after a year of gaping losses and an accelerating decline in share price, Citigroup, which has $2 trillion in assets and operations in scores of countries, is running out of time, analysts said.
Citi's going down...
Oh, well.
WHEEEEEEEEEEEEEEEEEEEEEEEEE!
[Drew's WHEEEEE™ Technology] Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
