Pessimism on the bailout

[koganbot]

Two pessimistic - or at least skeptical - articles on the bailout in today's New York Times:

Banks Are Likely to Hold Tight to Bailout Money, by Louise Story and Eric Dash

Banks Fail, and So Can Bailouts, by Floyd Norris

From the latter:

It will not help if the government responds to the pressure being applied by banks and some politicians to let the banks go on making up values for their weakened assets - values that will be justified by estimates of future cash flows coming from the very same people who created this junk, but now refuse to buy it for what they claim it is worth.

The Securities and Exchange Commission caved in to the banks on one fairly technical accounting issue this week, in the process saying that the opinions of the major auditing firms could be sidestepped. If it does the same on the far more important issue of mark-to-market accounting, don't be surprised to see this bailout fail.

If the regulators think the truth is too scary for the public to see, then perhaps it is.

My uninformed feeling here is that Paulson and Cox still live in Fantasy Land and are only reluctantly and slowly able to face reality, which would require that in this instance the gov't that provides the money has to tell the banks what to do, in the public interest, rather than just toss money to the banks and decide that this will allow the situation to take care of itself.

Comments

[koganbot]

And in his blog Norris is talking about the EU caving into political pressure from the banks. Seems fundamentally dysfunctional, both that the banks are applying the pressure and that public institutions are being swayed, since if to solve the crisis you need to restore confidence then you can't continue to allow the companies to conceal their situation or allow them to report their own figures without oversight. Why aren't the banks themselves pushing for (buzzword alert) transparency?

[skyecaptain.livejournal.com]

Never thought I'd be waiting on baited breath for the announcement of (presumably) Obama's Treasury Secretary, though I'm wondering what the hell is going to happen between now and then. Both candidates' responses to the crisis haven't instilled my confidence in how actively they're going to pursue further regulation, but I haven't given up hope that Obama's just laying low so as not to publicly make waves where he doesn't need to (of course, I think he does need to, but when mentioning taxation = poison regardless of whom you're taxing and any suggestion of redistribution of wealth brings out the right's inner McCarthy, I don't really blame him either).

[koganbot]

Well, what's really got to be done is not only redistribution of wealth (which probably won't amount to much redistribution, given that when poor people get money they spend it right away and it flows right back to the rich people) but also big amounts of DEFICIT SPENDING, which frightens moderate Democrats too. The tax rise comes later, except a bit of immediate on the superrich.

[skyecaptain.livejournal.com]

Grargh BATED Breath. The sensation of temporarily rooting for Anthony Perkins to destroy the evidence after Janet Leigh's murder in Psycho.

[koganbot]

Yves Smith sees a glimmer of hope:

Finally, A Meaningful Improvement in the Money Markets