December 2, 2008 9:00:14 PM CST
(Newser) – Fannie and Freddie have been nationalized, Lehman has collapsed, Merrill Lynch has been bought out—an economic disaster, right? Not really, Anatole Kaletsky writes in the Times of London: The US economy is actually showing signs of improvement. More than ever, "there is no contradiction between expecting a recovery, or at least stability, in the US economy and chaos in its financial system."
While unemployment is up slightly and housing prices are down, the US economy nevertheless grew strongly in the last quarter, and estimates are being revised upward. Overly lax regulation has distorted the financial market and expanded the gap between Wall Street and the "real economy." But as financial institutions make huge cuts in borrowing and lending, the effect on the real economy will not be great.
Source Times (UK)
Sep 23, 08 8:21 PM CDT The FBI is investigating four major US financial institutions whose collapse helped trigger a $700-billion bailout plan by the Bush administration. The agency is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, insurer AIG and Lehman Brothers. The inquiries will focus on the companies and the individuals that ran them, a senior law enforcement official said. More »
Sep 21, 08 10:11 PM CDT Goldman Sachs and Morgan Stanley, the nation's last two major independent investment banks, have gotten permission to become bank holding companies, the Federal Reserve said tonight. A fundamental rearrangement of Wall Street, the move will allow them to create commercial banks, which would bolster their resources, while inviting increased regulation. It reflects the Fed's determination not to let Goldman and Morgan Stanley fail, the New York Times notes. More »
Sep 19, 08 10:10 AM CDT Henry Paulson confirmed today that he is working on a "bold" plan to buy bad loans from banks, the Wall Street Journal reports. Such a plan would cost taxpayers “hundreds of billions of dollars,” Paulson said, but he believes it is necessary to stabilize the economy. “The ultimate taxpayer protection will be the stability this troubled asset-relief program provides to our financial system,” he said. More »
Sep 18, 08 1:15 PM CDT For a dedicated silver-lining hunter like Michael Lewis, there are plenty of upsides to the total collapse of the US financial system. “A lot of attractive office space seems to be opening up in midtown Manhattan, for instance,” he writes in Bloomberg. Here are five other reasons to celebrate:
Sep 15, 08 9:50 AM CDT The crisis on Wall Street will change the shape of the presidential campaign in its final weeks, forcing both sides to adjust their messages and strategies. Mike Allen, in Politico, details four major effects:
Because financial markets anticipate economic reality instead of simply responding to events, they are inherently prone to self-reinforcing cycles of euphoria and panic. - Anatole Kaletsky, Times of London economics columnist
The disproportionate growth of finance is illustrated by the fact that debts owed by financial institutions to one another have mushroomed since the early 1990s—from 42% to 112% of US GDP. - Anatole Kaltesky, Times of London economics columnist
Lehman Brothers • Fannie Mae • Freddie Mac • Merrill Lynch • credit market • financial markets • investment bank
