22h47, Manila
The question seemed simple enough.
US automakers got some money from the government, and in return, had to break its own limbs and cut off its own head(s). Banks got heaps, heaps more, and most of them still have their heads. The foxes are still guarding the hen house. Why the discrimination?
The answer? Not quite as simple.
What it seemed to boil down to, after Madame Chairman sifted through the Secretary’s words like “what we inherited” and “quickly” and “decisions” (according my vague impression and memory), was: timing.
So what does that mean? We (or our predecessors?) didn’t really know what we (they?) were doing? Or does this speak to something about that state capture we heard whispered on the wind?
Not sure. Maybe a bit of many things…
Watching as a complete outsider, this is probably how I’d score it (IMHO) after watching the first five minutes:
Warren 1 – 0 Geithner
Poor Tim. Wouldn’t want to be him right now. Or anytime soon.
***
Elizabeth Warren served some “financial chicken soup” a few days ago on the Daly Show – here is her fantastic chat with Jon.
The history of financial crises and regulatory response in the US, in a nutshell, according to Elizabeth Warren, as interpreted by me:
- Start in 1789. We boom-bust every 15 years for a couple of hundred years.
- Great Depression comes and we learn – and we regulate (3 biggies – FDIC, Glass-Steagall, SEC regulations)
- 50 years later, we start “pulling the threads out of the regulatory fabric”. What do we get? We get S&L. Then LTCM. Then Enron…
- “And what is our repeated response? We just keep pulling the thread out of the regulatory fabric”.
What do you call “doing the same thing over and over again and expecting different results”? Not sure whether to quote Ben Franklin, Albert Einstein or Sandra Bullock on that one, but I’m pretty sure we all know the answer…
For the financial chicken soup, watch the clip. Great stuff.
***
23h28, Manila [Bloomberg.com]
Vaguely tuning back in – there was an argument , and a Committee member just mistook Tim for an investment banker.
Sitting behind Mr. Geithner is a man (woman?) surreptitiously yet boldly holding up a fuchsia bit of construction paper. You can make out what it says in black marker, though:
Where’s … $$$?
That’s the 64 thousand dollar question… million dollar question … er…
Trillion dollar question??? (Write-down, bail-out, size of XX unregulated market – these days you can pretty much take your pick.)
***
UPDATE
23h51, Manila
Europe equities recover some of the day’s losses on Geithner’s revelation that “the vast majority” of US banks have more capital than they need, and that there is “thawing” in the credit markets. Close a smidgen higher than yesterday’s close.
Across the Atlantic, equities reverse with techs leading on some takeover news (all-cash hostile!!). Financials on S&P go from laggers to leaders. Meanwhile, curve steepens, 10yr yield rising.
Gold in the red, WTI in the green.
IMF estimates total credit-related losses by next year = USD 4.1 trillion (USD 2.7 trillion by banks)
***
Markets like what Tim said. Very good. But what about accountability? Exit strategy? Longer-term implications of all of this? Lots to stop to think about, but things are moving quickly…
