This is not necessarily my view, but I wanted to post it because it stimulates the fundamental debate about exactly how deep and long (and how much worse) the recession will be.
This is not a knock on Hank Paulson. Itâs simply that we canât afford two months of transition where the markets donât know who is in charge or where weâre going. At the same time, Congress should remain in permanent session to pass any needed legislation.
This is the real âCode Red.â As one banker remarked to me: âWe finally found the W.M.D.â They were buried in our own backyard â subprime mortgages and all the derivatives attached to them.
...
âA great judgment has to be made now as to just how big and bad the situation is,â says Jeffrey Garten, the Yale School of Management professor of international finance. âThis is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far â despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets â the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?â
http://www.nytimes.com/2008/11/23/opinion/23friedman.html?_r=1
We Found the W.M.D.
By THOMAS L. FRIEDMAN
Published: November 22, 2008
So, I have a confession and a suggestion. The confession: I go into restaurants these days, look around at the tables often still crowded with young people, and I have this urge to go from table to table and say: âYou donât know me, but I have to tell you that you shouldnât be here. You should be saving your money. You should be home eating tuna fish. This financial crisis is so far from over. We are just at the end of the beginning. Please, wrap up that steak in a doggy bag and go home.â
Now you know why I donât get invited out for dinner much these days. If I had my druthers right now we would convene a special session of Congress, amend the Constitution and move up the inauguration from Jan. 20 to Thanksgiving Day. Forget the inaugural balls; we canât afford them. Forget the grandstands; we donât need them. Just get me a Supreme Court justice and a Bible, and letâs swear in Barack Obama right now â by choice â with the same haste we did â by necessity â with L.B.J. in the back of Air Force One.
Unfortunately, it would take too long for a majority of states to ratify such an amendment. What we can do now, though, said the Congressional scholar Norman Ornstein, co-author of âThe Broken Branch,â is âask President Bush to appoint Tim Geithner, Barack Obamaâs proposed Treasury secretary, immediately.â Make him a Bush appointment and let him take over next week. This is not a knock on Hank Paulson. Itâs simply that we canât afford two months of transition where the markets donât know who is in charge or where weâre going. At the same time, Congress should remain in permanent session to pass any needed legislation.
This is the real âCode Red.â As one banker remarked to me: âWe finally found the W.M.D.â They were buried in our own backyard â subprime mortgages and all the derivatives attached to them.
Yet, it is obvious that President Bush canât mobilize the tools to defuse them â a massive stimulus program to improve infrastructure and create jobs, a broad-based homeowner initiative to limit foreclosures and stabilize housing prices, and therefore mortgage assets, more capital for bank balance sheets and, most importantly, a huge injection of optimism and confidence that we can and will pull out of this with a new economic team at the helm.
The last point is something only a new President Obama can inject. What ails us right now is as much a loss of confidence â in our financial system and our leadership â as anything else. I have no illusions that Obamaâs arrival on the scene will be a magic wand, but it would help.
Right now there is something deeply dysfunctional, bordering on scandalously irresponsible, in the fractious way our political elite are behaving â with business as usual in the most unusual economic moment of our lifetimes. They donât seem to understand: Our financial system is imperiled.
âThe unity seems to be gone. The emergency looks to be a little less pressing,â Bill Frenzel, the former 10-term Republican congressman who is now with the Brookings Institution, was quoted by CNBC.com on Friday.
I donât want to see Detroitâs auto industry wiped out, but what are we supposed to do with auto executives who fly to Washington in three separate private jets, ask for a taxpayer bailout and offer no detailed plan for their own transformation?
The stock and credit markets havenât been fooled. They have started to price financial stocks at Great Depression levels, not just recession levels. With $5, you can now buy one share of Citigroup and have enough left over for a bite at McDonalds.
As a result, Barack Obama is possibly going to have to make the biggest call of his presidency â before it even starts.
âA great judgment has to be made now as to just how big and bad the situation is,â says Jeffrey Garten, the Yale School of Management professor of international finance. âThis is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far â despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets â the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?â
If itâs the latter, then we need a huge catalyst of confidence and capital to turn this thing around. Only the new president and his team, synchronizing with the worldâs other big economies, can provide it.
âThe biggest mistake Obama could make,â added Garten, âis thinking this problem is smaller than it is. On the other hand, there is far less danger in overestimating what will be necessary to solve it.â
Conventional wisdom says itâs good for a new president to start at the bottom. The only way to go is up. Thatâs true â unless the bottom falls out before he starts.
This is not a knock on Hank Paulson. Itâs simply that we canât afford two months of transition where the markets donât know who is in charge or where weâre going. At the same time, Congress should remain in permanent session to pass any needed legislation.
This is the real âCode Red.â As one banker remarked to me: âWe finally found the W.M.D.â They were buried in our own backyard â subprime mortgages and all the derivatives attached to them.
...
âA great judgment has to be made now as to just how big and bad the situation is,â says Jeffrey Garten, the Yale School of Management professor of international finance. âThis is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far â despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets â the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?â
http://www.nytimes.com/2008/11/23/opinion/23friedman.html?_r=1
We Found the W.M.D.
By THOMAS L. FRIEDMAN
Published: November 22, 2008
So, I have a confession and a suggestion. The confession: I go into restaurants these days, look around at the tables often still crowded with young people, and I have this urge to go from table to table and say: âYou donât know me, but I have to tell you that you shouldnât be here. You should be saving your money. You should be home eating tuna fish. This financial crisis is so far from over. We are just at the end of the beginning. Please, wrap up that steak in a doggy bag and go home.â
Now you know why I donât get invited out for dinner much these days. If I had my druthers right now we would convene a special session of Congress, amend the Constitution and move up the inauguration from Jan. 20 to Thanksgiving Day. Forget the inaugural balls; we canât afford them. Forget the grandstands; we donât need them. Just get me a Supreme Court justice and a Bible, and letâs swear in Barack Obama right now â by choice â with the same haste we did â by necessity â with L.B.J. in the back of Air Force One.
Unfortunately, it would take too long for a majority of states to ratify such an amendment. What we can do now, though, said the Congressional scholar Norman Ornstein, co-author of âThe Broken Branch,â is âask President Bush to appoint Tim Geithner, Barack Obamaâs proposed Treasury secretary, immediately.â Make him a Bush appointment and let him take over next week. This is not a knock on Hank Paulson. Itâs simply that we canât afford two months of transition where the markets donât know who is in charge or where weâre going. At the same time, Congress should remain in permanent session to pass any needed legislation.
This is the real âCode Red.â As one banker remarked to me: âWe finally found the W.M.D.â They were buried in our own backyard â subprime mortgages and all the derivatives attached to them.
Yet, it is obvious that President Bush canât mobilize the tools to defuse them â a massive stimulus program to improve infrastructure and create jobs, a broad-based homeowner initiative to limit foreclosures and stabilize housing prices, and therefore mortgage assets, more capital for bank balance sheets and, most importantly, a huge injection of optimism and confidence that we can and will pull out of this with a new economic team at the helm.
The last point is something only a new President Obama can inject. What ails us right now is as much a loss of confidence â in our financial system and our leadership â as anything else. I have no illusions that Obamaâs arrival on the scene will be a magic wand, but it would help.
Right now there is something deeply dysfunctional, bordering on scandalously irresponsible, in the fractious way our political elite are behaving â with business as usual in the most unusual economic moment of our lifetimes. They donât seem to understand: Our financial system is imperiled.
âThe unity seems to be gone. The emergency looks to be a little less pressing,â Bill Frenzel, the former 10-term Republican congressman who is now with the Brookings Institution, was quoted by CNBC.com on Friday.
I donât want to see Detroitâs auto industry wiped out, but what are we supposed to do with auto executives who fly to Washington in three separate private jets, ask for a taxpayer bailout and offer no detailed plan for their own transformation?
The stock and credit markets havenât been fooled. They have started to price financial stocks at Great Depression levels, not just recession levels. With $5, you can now buy one share of Citigroup and have enough left over for a bite at McDonalds.
As a result, Barack Obama is possibly going to have to make the biggest call of his presidency â before it even starts.
âA great judgment has to be made now as to just how big and bad the situation is,â says Jeffrey Garten, the Yale School of Management professor of international finance. âThis is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far â despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets â the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?â
If itâs the latter, then we need a huge catalyst of confidence and capital to turn this thing around. Only the new president and his team, synchronizing with the worldâs other big economies, can provide it.
âThe biggest mistake Obama could make,â added Garten, âis thinking this problem is smaller than it is. On the other hand, there is far less danger in overestimating what will be necessary to solve it.â
Conventional wisdom says itâs good for a new president to start at the bottom. The only way to go is up. Thatâs true â unless the bottom falls out before he starts.
