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Popular Media So, let me get this straight. We’re in a major recession triggered by a collapse in the housing market, itself the inevitable result of government . . .
So, let me get this straight. We’re in a major recession triggered by a collapse in the housing market, itself the inevitable result of government policies, led by Fannie Mae and Freddie Mac, to get the wrong loans to the wrong people so they could buy the wrong houses. The Obama Administration’s remedy is not to let Fannie and Freddie die a long-overdue and merciful death, but to prop them up, to give them additional powers, and to subsidize private mortgage lenders who extend yet more credit to more borrowers who can’t pay it back, thus making what might have been a temporary misallocation of the housing stock into a permanent one. Brilliant!
Read the full piece here.
Popular Media As I noted elsewhere yesterday, the “stimulus” bill making its way through Congress is a fine illustration of the Higgs effect, the tendency of government to expand . . .
As I noted elsewhere yesterday, the “stimulus” bill making its way through Congress is a fine illustration of the Higgs effect, the tendency of government to expand massively in response to “crises,” real or imagined. Naomi Klein’s “Disaster Capitalism” thesis is exactly backward: “disasters” are inevitably followed by huge increases in the public sector at the expense of the private. Anyway, if you have any doubt that the current legislation has precious little to do with economic stimulus, consider the details of the House’s proposed $825 billion package, which includes:
TOTM The Law Market, Larry Ribstein’s new and important book with Erin O’Hara looks great and is available here from Oxford University Press. The book description . . .
The Law Market, Larry Ribstein’s new and important book with Erin O’Hara looks great and is available here from Oxford University Press. The book description from the website sets the stage…
TOTM There are some pretty scary devils in the details of this Detroit bailout legislation. This WSJ article provides some specifics. Under the terms of the . . .
There are some pretty scary devils in the details of this Detroit bailout legislation. This WSJ article provides some specifics.
Under the terms of the draft legislation, “the government would receive warrants for stock equivalent to at least 20% of the loans any company receives.” Let’s put that in perspective. General Motors is seeking around $10 billion in short-term loans, so the legislation would give the government the option to buy a $2 billion stake in GM. GM’s market capitalization — the market value of its outstanding stock — is currently around $3 billion. If the government were to exercise its option today, it would pay GM $2 billion (thereby enhancing GM’s value by that amount) and would receive $2 billion worth of newly issued stock in a (now) $5 billion company. Thus, the government would end up owning 40% of GM.
TOTM I had the pleasure last week of participating in a bailout panel at William & Mary Law School. The William & Mary Federalist Society, which . . .
I had the pleasure last week of participating in a bailout panel at William & Mary Law School. The William & Mary Federalist Society, which hosted the event, asked each panelist to address three topics: what led to the current situation, how the bailout plan will (or won’t) fix things, and suggestions for implementing a bailout plan. I’ve already blogged a bit about the first two topics — here I speculate on one of the causes of the mess (Fannie/Freddie); here I discuss the original (“buy troubled assets”) versus revised (“inject capital directly into financial institutions”) bailout plans. I thought I’d take a few moments to blog about the third topic — suggestions for implementing the bailout plan.
TOTM Not so fast, says Will Wilkinson is this must read (and well earned) dismantling of Jacob Weisberg’s recent Slate column which has been getting a . . .
Not so fast, says Will Wilkinson is this must read (and well earned) dismantling of Jacob Weisberg’s recent Slate column which has been getting a lot of attention…
TOTM Today’s New York Times features an op-ed by Michigan Law Professor Michael Barr and former Clinton advisor Gene Sperling that (somewhat predictably) blames our current . . .
Today’s New York Times features an op-ed by Michigan Law Professor Michael Barr and former Clinton advisor Gene Sperling that (somewhat predictably) blames our current financial mess on a lack of “common sense regulation” and exonerates the Community Reinvestment Act, Fannie Mae, and Freddie Mac.
TOTM Many observers have been shocked by the level of government involvement in the U.S. economy in recent days. Among other things, the government has (1) . . .
Many observers have been shocked by the level of government involvement in the U.S. economy in recent days. Among other things, the government has (1) bailed out an insurance company that got “too big to fail,” (2) decided to spend up to $700 billion buying the distressed assets of financial firms (and apparently directly investing in those firms), and (3) banned investors from short-selling the securities of a number of firms. Seems like a pretty massive governmental response, no?
TOTM Last week I posted about Lucian Bebchuk’s thoughtful bailout plan, which would have expanded Treasury’s powers to include the ability to make direct investments in . . .
Last week I posted about Lucian Bebchuk’s thoughtful bailout plan, which would have expanded Treasury’s powers to include the ability to make direct investments in ailing financial firms (as opposed to just buying their distressed assets). I was under the impression the bailout legislation didn’t provide Treasury with such authority. An article in today’s WSJ, though, suggests otherwise.
