EconoMonitor

Nouriel Roubini's Global EconoMonitor

Roubini: Anglo-Saxon model has failed

The Anglo-Saxon model of supervision and regulation of the financial system has failed, Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University, told the Financial Times on Monday.

Answering questions from FT.com readers, Prof Roubini, who is widely credited with having predicted the current financial crisis, said the supervisory system “relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance.”

“All the pillars of Basel II have already failed even before being implemented,” he added, referring to the internationally agreed set of banking regulations that are forcing banks to set aside more capital to maintain their existing lending.

Prof Roubini also predicted that it was possible another large bank could fail, saying: “In many countries the banks may be too big to fail but also too big to save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system”.

He also criticised the US and UK approach to bank bail-outs, comparing it with attempts by Japan in the 1990s to solve its banking crisis. “The current US and UK approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze,” he said.

Economists and politicians hope to identify tentative signs of recovery in leading economies during the second half of 2009, as stimulus measures from governments and action on interest rates by central banks begin to kick in.

But recent data suggest it may take a little longer. Meanwhile, the World Economic Forum’s latest report warns of the risks of a fiscal crisis, created by the very government spending intended to rescue economies from the turmoil in the global financial system.

So, is the worst nearly over? Or is there still a way to go? Recently returned from Davos, Nouriel Roubini, chairman of RGE Monitor and professor of Economics at New York University, will answer readers’ questions on the outlook for the global economy and its impact on markets from 1400 GMT on Monday February 9.


It is pretty much consensus now that 2009 will be a zero growth year for the world economy (something that you forecast well in advance). It seems that the major risk for the following years is having a lost decade of Japanese-style stagnation but on a worldwide basis. How are the governments in US and Europe faring so far in their effort to avoid that? Marco, Sao PauloNouriel Roubini: To avoid a Japanese style multi-year L-shaped near-depression or stag-deflation (a deadly combination of stagnation, recession and deflation) the appropriate, coherent and credible combination of monetary easing (traditional and unorthodox), fiscal stimulus, proper clean-up of the financial system and reduction of the debt burden of insolvent private agents (households and non-financial companies) is necessary.The eurozone is well behind the US in its efforts as: a) the ECB is behind the curve in cutting policy rates and creating non-traditional facilities to deal with the liquidity and credit crunch; b) the fiscal stimulus is too modest as those who can afford it (Germany) are lukewarm about it and those who need it the most (Spain, Portugal, Greece, Italy) can least afford it as they already have large budget deficits; c) there is lack of cross-border burden sharing of the fiscal costs of bailing out financial institutions.The U.S. has done more (with its aggressive monetary easing and large fiscal stimulus putting it ahead) but two key elements are key to avoid a near-depression and still missing: a proper clean-up of the banking system that may require a proper triage between solvent and insolvent banks and the nationalization of many banks; and a more aggressive and across-the-board solution to the unsustainable debt burden of millions of insolvent households.Thus, I would say the L-shaped near-depression scenario is possible.—————————————————————————————————————–

How can Davos, a gathering of the greediest, most avaricious and incompetent people of the planet, ever fix any of the problems they have created in the first place, and hugely benefited from?. Do you agree that when the boom was at its height, you were mistreated there when you tried to draw attention on the looming crisis? Are you now afraid of being now co-opted by the system and losing your independence? Marcel Knecht, Villa Santiago, Mexico

NR: It is important to keep one’s intellectual rigor and honesty free from any financial conflict of interest (I never trade in markets and so I am never “talk my book” when I present my views).

I have kept my balanced and analytically rigorous but bearish view over time and adjusted my outlook only at the margin in light of the evolving circumstances.

But the basic thrust of my analysis and views about the severity of this financial and economic crisis – the worst since the Great Depression – has not changed.

I don’t think anyone could suggest that I have been co-opted by the system and lost my independence. If anything my concerns that a severe U-shaped global recession may turn into a worse, L-shaped near-depression have somewhat increased over time.

——————————————————————————————————————–

It seems clear that governments will not allow their banking system to fail altogether and that they will intervene to rescue whenever needed. My question is: The governments will save the banks, but who will save the governments? Is it possible that we are about to see countries default? What does that mean for the global economy? Which countries are the ones who pose the greatest risk? Jonathan Arad

NR: In many countries the banks may be too-big-to-fail but also too- big-to-save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system.

Traditionally only emerging markets suffered – and still suffer – from such a problem. But now such sovereign risk – as measured by the sovereign spread – is also rising in many European economies whose banks may be larger than the ability of the sovereign to rescue them: Iceland, Greece, Spain, Italy, Belgium, Switzerland and, some suggest, even the UK.

The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign: banks, other financial institutions and, soon enough possibly, households and some important non-financial corporate companies.

At some point a sovereign bank may crack, in which case the ability of governments to credibly commit to act as a backstop for the financial system – including deposit guarantees – could come unglued.

———————————————————————————————————————

What level of oversight is now appropriate from the financial regulatory authorities? Do they need very large new measures or should they have a light touch? Ashok Soni

NR: It is clear that the Anglo-Saxon model of supervision and regulation of the financial system has failed.

It relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance.

Furthermore, the self-regulation approach created rating agencies that had massive conflicts of interest and a supervisory system dependent on principles rather than rules. This light-touch regulation in effect became regulation of the softest-touch.

Thus, all the pillars of Basel II have already failed even before being implemented.

Since the pendulum had swung too much in the direction of self-regulation and the principles-based approach, we now need more binding rules on liquidity, capital, leverage, transparency, compensation and so on…

But the design of the new system should be robust enough to counter three types of problems with rules:

A tendancy toward ‘regulatory arbitrage’ should be bourne in mind, as bankers can find creative ways to bypass rules faster than regulators can improve them.

Then there is ‘jurisdictional arbitrage’ as financial activity may move to more lax jurisdictions.

And finally, ‘regulatory capture’ as regulators and supervisors are often captured – via revolving doors and other mechanisms – by the financial industry.

So the new rules will have to be incentive compatible, i.e. robust enough to overcome to these regulatory failures.

———————————————————————————————————————

How long will be before we can tell if the US and UK governments’ plans to rescue the banks prove effective or not? If they don’t when do you think lending will recover to near-normal levels? Canh Humphries, Beckenham

NR: There are three basic approaches to a clean-up of the banking system: recapitalization together with purchase by a bad bank of toxic assets; recapitalization together with guarantees – after a first loss – of the bad assets; outright government takeover (call it nationalization) of insolvent banks to be cleaned after takeover and then resold to the private sector.

Of the three options the first two have serious flaws: in the bad bank model the government may overpay for the bad assets as the true value of them is uncertain; even in the guarantee model there can be such implicit over-payment (or over-guarantee that is not properly priced).

In the bad bank model the government has the additional problem of having to manage all the bad assets it purchased.

Thus, paradoxically nationalization may be a more market friendly solution: it creates the biggest hit for common and preferred shareholders of clearly insolvent institutions and – possibly – even the unsecured creditors in case the bank insolvency is too large; it provides a fair upside to the tax-payer; it can resolve the problem of government managing the bad assets by reselling most of the assets and liabilities of the bank to new private shareholders after a clean-up of the bank.

This “nationalization” approach was the one successfully taken by Sweden while the current US and UK approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze.

———————————————————————————————————————

To balance the US economy – given the US structural current account deficit – the fiscal deficit needs to baloon. Can the US default on its debt? Alessandro Magnoli Bocchi, Kuwait

And, a related question also addressed in the next answer: What are the possible damaging, unintended consequences of the US stimulus plan? Alessandro Magnoli Bocchi, Kuwait

NR: While a large fiscal stimulus is necessary to avoid a greater fall of aggregate demand there are also reasons to be skeptical about the effectiveness of such a stimulus:

Most infrastructure spending is not ‘shovel-ready’ and its implementation may take too much time.

The tax stimulus may – like the 2008 rebate – be mostly saved or used to reduce credit card and mortgage debt, since, given the credit crunch, the ability of households to leverage the tax rebate to buy durable goods or homes is massively impaired.

Furthermore, the multipliers of fiscal policy are ambiguous and, more importantly, a tsunami of new public debt issuance may lead by the end of 2009 to a significant increase in long government bond rates as most countries in the world will now run budget deficits and thus the global supply of public savings will shrink.

With US fiscal deficits likely to be about $2 trillion in 2009 and $1.5 trillion in 2010; who, outside the US, as most of the financing of US fiscal deficits is done by non-residents, is going to buy such debt and at what dollar value of and level of interest rates?

Eventually, large and persistent fiscal deficits may even lead to a downgrade – in a few years – of the AAA rating of the US government.

————————————————————————————————————–

Do you think investigations and prosecutions should be conducted by the U.S. Government on the naked short selling of equities in the stock market? Should they be? Erich Benner, Blythewood, South Carolina

NR: The ban on naked short selling of equities was a mistake.

Short selling did not cause this crisis: it only reflected the concern about the solvency of many firms. And the ban on naked short selling only transferred the speculative pressure from equities to the credit defualt swaps market creating even greater problems in the credit derivative markets.

When equity markets were in a speculative frenzy of an asset bubble no one requested limits to the ability of investors to go long (even if such restrictions in the form of higher margins for leveraged purchases of stocks would have been beneficial).

And when during the same bullish bubble analyst after analyst showed up in the financial media and talked his book up, with no one objecting to this spin cycle. But when investors become bearish and start short selling stocks one hears talk about prosecuting the “evil short sellers”.

This is an outright silly view even if, in the downwards speculative frenzy, market prices can fall below fundamental valuations as cascading effects cause falling prices to lead to margin calls and greater forced selling.

But banning short selling is not the proper way to address this disruptive market dynamic.

Starting with the excesses of the boom period of a bubble is a more appropriate response, and one that would prevent such bubbles from becoming excessive, limiting the damage from the bursting of such massive bubbles.

———————————————————————————————————————

Has financial globalization come to an end? Jacques Ergas, Chile

NR: Financial globalization has not come to an end, but there is certainly a backlash against it.

To paraphrase Churchill – capitalist market economies open to trade and financial flows may be the worst economic regime, apart from the alternative, as non-market economy models have failed.

So while this crisis does not imply the end of market economy capitalism it has shown the failure of a particular model of capitalism: the laissez faire unregulated (or aggressively deregulated) wild-west model of free market capitalism with lack of prudential regulation and supervision of financial markets and with the lack of proper provision of public goods by governments.

It is the failures of ideas such as the “efficient market hypothesis” that deluded itself about the absence of market failures such as asset bubbles; the “rational expectations” paradigm that clashes with the insights of behavioral economics and finance; the “self-regulation of markets and institutions” that clashes with the classical agency problems in corporate governance that are thenselves exacerbated in financial companies by the greater degree of asymmetric information -how can a chief executive or a board monitor the risk-taking of thousands of separate profit-and-loss accounts? Then there are the distortions of compensation paid to bankers and traders.

This crisis also shows the failure of ideas such as the one that securitization reduces systemic risk rather than actually increase it; that risk can properly priced when the opacity and lack of transparency of financial firms and new instruments leads to unpriceable uncertainty rather than priceable risk.

——————————————————————————————————————

Will the crisis bring about a permanent, significant shift in the economic power balance of the world? Giles Chance, China

NR: The Anglo-Saxon economic and financial model is wounded and the role of the US as the leading global economic, financial and even geo-strategic superpower is reduced.

Even without this crisis, the relative and absolute power of the US would have been reduced by the rise of the fast growing economies of Brazil, Russia India and China and by the emergence of the European Union.

But the policy mistakes of the US that perpetuated twin fiscal and current account deficits and triggered the worst financial and economic crisis since the Great Depression has accelerated this shift in the economic and financial power balance of the world.

Economic and financial superpowers or empires tend to be net creditors and net lenders (running current account surpluses) such as the British Empire at its peak. But such empires decline – the British pounds role as the world’s leading reserve currency was lost during World War II when the UK became a large net debtor and net foreign borrower (running current account deficits) and had large domestic fiscal deficits.

The US is now the largest net borrower in the world (running huge current account deficits) and the largest net debtor in the world while its domestic fiscal deficits are surging too.

And unlike the 1980s when the US twin deficits were financed by the its friends and allies (Japan, Germany and the rest of the EU) this time around the largest lenders and creditors of the US are either its strategic rivals (Russia, China, etc.) or a bunch or relatively unstable petro-states.

So this balance of financial terror makes the US vulnerable to the kindness of strangers. This growing weakness of the US suggests a paradigm shift in the economic and financial – and eventually even geostrategic – power balance of the world.

———————————————————————————————————————

Do you believe in the projections made by the Chinese officials predicting a return to steady growth when all the planned stimulus measures have been implemented? Do you expect a reversal in the decisions taken the last 5 years to outsource a majority of the developed economies production to China? Fiorini Mauro, Belgium

NR: China is now experiencing a hard landing and I predict that Chinese growth in 2009 may not be higher than 5 per cent.

For a country that needs a growth rate of about 10 per cent to move millions of poor rural farmers to the modern urban industrial sector, a growth rate of 5 per cent would effectively be a hard landing.

Fourth quarter gross domestic product growth in China – measured on a quarter to quarter annualized basis – was closer to 0 per cent than to the 6.8 per cent year-over-year growth reported by the Chinese government.

Other factors also suggest a hard landing: There was a sharp fall in generation of electricity in the fourth quarter. China’s purchasing manager’s index was well below 50 and closer to 40 for six months in a row; there has been a sharp fall in imports, mostly of intermediate inputs and raw materials. And while some of the latest data show a marginal improvement in the second derivative of growth in January, the first derivative still shows contraction. The manufacturing sector is still 40 per cent of GDP and it is clearly shrinking.

Whether the short-run policy stimulus in China will be effective or not is not clear.

Instead, consumption levels are still depressed and private savings too high because of structural reasons that will take time to change. The out-sourcing of production to China and other emerging markets was not a mistake. But a model of growth based on cheap exports given an undervalued currency is now in crisis as the US downward adjustment of consumption requires an increase of domestic private and public demand in the surplus countries.

———————————————————————————————————————

I have read your grave warning about deflation. But, nevertheless, won’t the enormous increases in money supply (out of thin air largely) eventually give rise to serious inflation, possibly hyperinflation? George Todd, Benalmadena, Spain

NR: In the short run the greatest risks to the global economy are coming from deflationary pressures: slack in goods markets as aggregate demand falls relative to aggregate supply; slack in labor markets as unemployment rises sharply; slack in commodity markets as commodity prices tumble.

Concerns have been expressed that the massive injections of liquidity will be eventually inflationary.

But with large output gaps and surging unemployment rates, inflationary pressures are unlikely until such gaps are shrinking sharply.

Also, the injections of liquidity are satisfying a surging demand for liquidity so that the absence of such a large supply of money would lead to spikes in money market rates; while base money is sharply rising other measures of money and credit are flat or shrinking as the money multiplier falls. This signals that the extra liquidity is being hoarded rather than spent or lent out.

It is true that eventually there may be a temptation to use permanent – inflationary – monetization of large fiscal deficits to reduce the real value of public and private debts; indeed the inflation tax may become politically the path of least resistance if government would find it hard and unpopular to raise actual taxes.

But even a relatively dovish central bank such as the Federal Reserve under Ben Bernanke cannot afford to let the inflation genie out of the bottle – if inflation expectations were to rise from low single digits to high single digits or even double digits – because such a surge in inflation would – eventually – cause the need for a harsh Volcker-style recessionary disinflationary policy to bring the inflation- expectations-genie back behind glass.

Also, unexpected inflation can reduce the real value of nominal debts at fixed interest rates. But many liabilities are at variable rates: mortgages, bank deposits, short term debts of households, banks, governments, corporations. So a surge in inflation cannot reduce the real value of such debts as the interest rate on them would rapidly be re-priced to include any increase in expected inflation. So the inflation tax may not even be effective in reducing the liabilities of the private and public sector unless it becomes extremely and dangerously large.

———————————————————————————————————————

You recently mentioned total credit losses of $3.6 trillion compared to current losses of $1.6 trillion. Will the institutional and geographic distribution of the $2 trillion increase match that of the first $1.6 trillion, or will it be new regions and new institutions, that will get sucked in? Paul Broder

NR: Our RGE Monitor estimates of $3.6 trillion of peak credit losses refer only to loans and securities that were originally generated by US financial institutions. Of these $3.6 trillion $1.8 trillion will be borne by US banks and broker dealers while the rest by other capital market firms and investors. Since the losses coming from securities are estimated to be $2 trillion and about 40 per cent of them (based on IMF and Federal Reserve estimates) are borne by non-US investors we already have $800 billion of losses that will hit foreign investors/financial institutions, mostly in Europe.

But we have not done yet a systematical analysis of the losses that will hit Eurozone and UK banks or banks in other regions of the world. Losses to these institutions include the $800 billion from US securitized products sold abroad as well as the other losses deriving from loan origination and securitization and issuance of other instruments in areas such as Europe and other parts of the world.

A preliminary analysis suggest that, in the aggregate, the US banking system is insolvent as its capital before the crisis was $1.4 trillion and below expected losses of $1.8 trillion; a good part of the UK banking system appears also to be insolvent.

——————————————————————————————————————

Is the solution to just keep re-inflating bubble after bubble to recapitalize our consumer driven economy or is it time for a huge systemic paradigm shift away from consumerism? What type of shift would you envision and would it destroy the economy as we currently know it? Robert Singer, Oregon, USA

NR: For the last 30 years the US has been growing fast only during periods of asset bubbles that eventually burst with significant economic and financial costs.

The 1980s real estate bubble went bust in the late part of that decade leading to a severe banking crisis for the Savings and Loan banks, a credit crunch and a severe recession in 1990-91; next the 1990s tech/internet bubble went bust in 2000 leading to the 2001 recession; massive monetary and credit easing – as well as lax supervision/regulation of mortgages and credit – led to another housing and credit bubble that has now gone bust creating a severe financial crisis and recession.

The current monetary easing may lead to another bubble but we are somehow running out of bubbles to create.

Housing, credit, equities, commodities, hedge funds, private equity bubbles: they have all gone bust now. We need to create an economic system that is less prone to bubbles and more likely to lead to sustainable stable growth.

For the last few years the US has overinvested in the most unproductive form of capital – residential housing stock that increase utility but not labor productivity – and not enough into physical capital that increases the productivity of labor.

Also we overinvested in the financial sector, a corollary of the housing boom: when the S&P500 market capitalization of financial firms was 25 per cent of the market and when over a third of the profits or earnings of S&P500 constituents came from financial companies, that was an excess of finance.

And having a country where there are more financial engineers than computer engineers or mechanical engineers means a misallocation of human capital as well.

So we need to create a growth model relying less on housing/real estate, less on finance and less on having the brightest minds of the country going into financial services rather than into the production and innovation of new and improved goods and services.

—————————————————————————————————————

Could any of the weak eurozone countries should be forced out of the single currency because of the effects of the crisis, and if that happened, how is the euro likely to behave? Vincenzo, Italy

NR: There is now a rising – even if still quite low – risk that some countries will eventually be forced out of the eurozone.

The whole idea of a monetary union was that since member countries would not have independent monetary policy, independent fiscal policy and independent exchange rate policy they would be induced to implement more aggressively structural reforms to ensure convergence of productivity growth and prevent divergence of economic performance.

Germany went through a brutal corporate restructuring that led to rising labor productivity growth with modest nominal wage growth that restored the competitiveness of the country.

In Spain, Portugal, Italy and Greece instead such structural reforms lagged and nominal wage growth outstripped productivity growth leading to increases in relative unit labor cost and real appreciation that reduced competitiveness. And now, on top of this loss of competitiveness some eurozone economies suffer also of a too-big-to-be-saved problem as the potential losses of their banks are larger than the national fiscal resources.

And now, on top of this loss of competitiveness some eurozone economies suffer also of a too-big-to-be-saved problem, as the potential losses of their banks are larger than the national fiscal resources.

So the monetary union is under pressure as sovereign spreads are also rising. Two years ago – while still being in the opposition – the current Italian prime minister, Silvio Berlusconi and Mr Tremonti, his exonomic minister, argued that the euro had been a disaster for Italy.

With friends like these who needs enemies in the monetary union?

While the risk of a break-up of the eurozone is still distant this financial and economic crisis is the first real test of the monetary union.

——————————————————————————————————————–

Many analysts are now predicting that the bond market is the last and most serious bubble which will burst shortly. Do you agree? Mike, Qatar

NR: The current fall in government bond yields is justified by economic fundamentals: a severe recession, risks of deflation, risk aversion and move away from risk assets such as equities.

But certainly, over time, large and unsustainable budget deficits in many emerging and advanced economies, may lead to a rise in sovereign risk and a risk in government bond yields. Also the risk – small but rising – that excessive permanent monetization of such deficits will lead to much higher inflation suggests the existence of a minor bubble in government bond yields.

And indeed, in the last two weeks, the back-up in yield on US inflation-linked bonds and traditional 10 to 30 year bonds suggest the concerns of market participants about the sustainability of large fiscal deficits that – over the long run – may lead to solvency concerns.

225 Responses to “Roubini: Anglo-Saxon model has failed”

MM CAFebruary 9th, 2009 at 1:15 pm

Second… Darn… CNBC needs to go off the air Feb 17th jsut like the analog TV broadcasts… They misinform the public…. their cronies on Wall street must be paying them well… or the PTT or both…. Nouriel says we have 3.6 trillion to deleverage, when we are done it will be double that and our total bailout will be 15 trillion… So how and who will pay for that? not Wall street, just plain aol 300 million americans and the other 4 billion average joes througout the world… We will see 30 million unempployed Americans by December… Thirteen was interesting last night…anyone watch it?

Tom ZFebruary 9th, 2009 at 1:33 pm

Almost first.Indeed, the model has failed. But those who has been in charge of that model will deny it. One cannot change a brainwashed mind.

GuestFebruary 9th, 2009 at 2:03 pm

NR: It is clear that the Anglo-Saxon model of supervision and regulation of the financial system has failed.Sounds like NR is back in the saddle again!

MedicFanFebruary 9th, 2009 at 2:19 pm

Medic,I enjoyed your new post very much. I think your analogy is spot on – the quandary, of course, is what do you do with those “patients” that you discuss?Knowing that I’m oversimplifying, the conservatives would say, “let ‘em die – they’ve made their choices, and the consequences followed. Not our problem.” Then the liberals would say, “That’s inhumane! Just because they’ve made bad choices doesn’t mean they should be thrown to the wolves…. We need to HELP these people” (see Obama’s comments on Geithner today to get an idea of what I mean). And round and round we go…I know that in reality, there’s a little conservative and a little liberal in each of us. There’s this constant tension between, “do we let these institutions fail?” or “do we do what we can to get them back on their feet?” I think we all wish there were some way to achieve both. The battle between mercy and justice is a paradox our mortal minds don’t seem to be able to grasp…

GuestFebruary 9th, 2009 at 2:35 pm

Hayes posted this on the previous thread, but it deserves more attention.CNBC just a while ago – Roubini and Taleb – (Note that the CNBC anchors are pathetic but funny)Roubini and Taleb part Ihttp://www.cnbc.com/id/15840232?video=1027496846&play=1Roubini and Taleb part IIhttp://www.cnbc.com/id/15840232?video=1027524452&play=1Besides the sad state of awareness of even the talking heads, there is something else worth pointing out. Notice how NR ticks off “quantitative easing” as one of the elements in his rescue plan. Then he says again cash is king for the next year (several years implied)! So, for the good of the country, get out of gold and into cash and let the “QE” rip. On the other hand, I’ll just stick with gold thank you.

GuestFebruary 9th, 2009 at 2:42 pm

The crisis started on Aug 9,2007 and the U.S.Government has failed to reduce the debt overhang as the professor suggested. Increasing employment and reducing the debt overhang will be the only viable solutions and they have to be instituted simultaneously. Geithner seems to be moving in the direction of enticing private equity capital to buy the bad assets with a downside protection from treasury. There is a book called “The Gods that failed” (Atkinson and Elliot) that describes the offer that Richard Branson made to theChancellor of the Exchequer during the Northern Rockcrisis. He wanted to own Northern Rock and allow thegovernment to guarantee the downside. According to the book, Goldman Sachs was a consultant to the Brits,and they recommended nationalization. The Geithner Plan seems to be leaning in the direction of a downside guarantee for private equity capital to buythe troubled assets. Are we going to do what the Britsrefused to do?

Paul Lai, FranceFebruary 9th, 2009 at 2:48 pm

But the US can print unlimited amount of money so aren’t they anyway the one that will ultimately survive this crisis ?

HubbsFebruary 9th, 2009 at 2:55 pm

I guess the guy that ticks me off the most in this CNBC interview with Dr Roubini and Taleb is this Dennis Dweeb and his insistence that executive bonuses are only a small part of the problem. The fact is these CEOs are like generals of armies who command whole financial institutions. They have used these armies to enrich themselves through nefarious means while they let their foot soldiers suffer and those whom they invaded (the sheeple) wiped out through depletion of their savings and investments through egregious fees, tax payer bailouts and inflation.The financial industry is a BS industry. And this Geither guy looks like a preppy dweeb too.So how is your day going bloggers?

GuestFebruary 9th, 2009 at 3:00 pm

Total debt of US both public and private is over $50 trillion….by the end of this crisis it will be $25 trillion…this massive deleveraging can only be partially offset by printing money….US has 100% of world GDP in Debt…this is the largest credit bubble in world history….reflation will not work this time…the forces of deflation have been unleashed and will bring catastrophic destruction to the world economy. Asia is already in a depression, this is almost undisputable. The economic numbers (exports, OECD LEI, etc.) are much worse than the 1998 Asian crisis. China continues to fudge its economic data. In the end, this will not matter as it will become apparent that this great economic miracle is nothing but a fraud propped up by debt. There is literally nowhere to hide. We are in the midst of a huge deflationary collpase.

GuestFebruary 9th, 2009 at 3:01 pm

so still no definitive answers!!!!!!!http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=M1ARTM0010930In all the cases, regulators were left trying to answer one simple question: how did the wheeler-dealers get away with it for so long? While there is no definitive answer, there is a common thread running through – none of the top executives at the corporations seemed to have safeguards to ensure that they knew exactly what their employees were doing. And as long as there were healthy profits, no one seemed to careIn all the cases, regulators were left trying to answer one simple question: how did the wheeler-dealers get away with it for so long? While there is no definitive answer, there is a common thread running through – none of the top executives at the corporations seemed to have safeguards to ensure that they knew exactly what their employees were doing. And as long as there were healthy profits, no one seemed to care

HalFebruary 9th, 2009 at 3:08 pm

A simple change in the financial systems is required:If its not specifically approved and regulated — IT IS ILLEGAL!

CFebruary 9th, 2009 at 3:09 pm

Confused. Toward the end NR says he agrees with NNT who said Geithner, in effect, was part of the problem and the banking plan won’t work. I thought NR thought Geithner was a good choice. No?

Free TibetFebruary 9th, 2009 at 3:12 pm

Roubini:

The out-sourcing of production to China and other emerging markets was not a mistake. But a model of growth based on cheap exports given an undervalued currency is now in crisis as the US downward adjustment of consumption requires an increase of domestic private and public demand in the surplus countries.

That’s why I read this. I love this guy. Does anybody else here get this?It’s not out-sourcing to take advantage of comparative advantages that is the problem. It is the stupid, stupid, stupid idea of developing an industrial economy for 1300 million people on the basis of cheap energy and the back of an already saturated US consumer market. Plus the ∑ (stupid^n) idea of leveraging the proceeds of that trade into non-productive sectors!Who else gets it?

GuestFebruary 9th, 2009 at 3:15 pm

Roubini gives me hope. He isn’t just an opinion: he’s a force; he’s become a world-class activist. Roubini has credibility: he operates from the facts: the world is his base; he understands and can interpret economic machinery and machinations. Roubini and his GlobalEcono Monitor may be the key to America’s and Americans’ economic survival—at home and abroad.For this one powerful statement alone (among many), I would champion Roubini: “[H]aving a country where there are more financial engineers than computer engineers or mechanical engineers means a misallocation of human capital… [W]e need to create a growth model relying less on housing/real estate, less on finance and less on having the brightest minds of the country going into financial services rather than into the production and innovation of new and improved goods and services.”Individual entrepreneurs and individual producers of the U.S. economy get more representation from Nouriel Roubini than from the entire Congress of the United States.

GuestFebruary 9th, 2009 at 4:07 pm

Is it just me, or does anyone else think the SEC didn’t want to get Madoff? It seems like they were trying their best not to catch him. Now, they fire the SEC investigator, like that will somehow divert attention from their complicity.

AnonymousFebruary 9th, 2009 at 4:18 pm

The SEC had a hotline set up so that if a company felt it was being investigated too aggressively it could call in a complaint. Imagine that. Talk about being on the side of criminals. Tell me having a program like that wouldn’t put an investigator in fear for actually doing his or her job correctly. The chain of people involved in hatching that scheme ought to be dismissed and the dismissals should go all the way up–all the way up.

GSMFebruary 9th, 2009 at 4:25 pm

If this stimulous plan (porkfest) is the best that Obama can do then there is no doubt in my mind that the US is going under.The whole structure of the US economy is predicated on an ever growing body of unregulated expanding debt and borrowing. Funded by household asset value increases rather than manufacturing and production. Absent that growth in debt, the US economy cannot be validated. Unfortunately, many other nations have followed this flawed and ONE WAY model, in the process discarding the support provided by the “living within your means” economic model.That has unravelled. The model is manifestly lost, over , ended. It no longer works. Yet, that will not stop the powerful elite’s sending taxpayers into the poorhouse for generations in their corrupt efforts to save their model (with YOUR money)- the one that has so deeply enriched them. At the expense of workers and the middle class who have been duped into debt serfdom, all the while being robbed of well paid jobs and wage/salary growth.Globalization (an integral component of the elite’s self enrichment model)has exerted its irresistable downard pressure on salaries/wages in the developed economies transferring massive treasure into beneficiaries offshore.But that was not enough for the greedy Banksters. That “transferring” of wealth brought on by the explosion in globalization was mannah from heaven to the snakes in suites Banksters. They were in the middle. Doing deals, charging fees, filling the income gaps with loans and credit, distorting the practices of lending and investment with derivatives and dark pool trading.So, I say again America, WAKE UP!! You are now being raped,after having been pillaged and plundered. There will be no escaping the hardship now unfolding. The real question is ; will there be anything left from which to substantively rebuild? You need to conserve your wealth, save whatever you can, live within your means and not allow these thieves to ship yet more of your hard earned tax dollars into the coffers of this corrupt nest of vipers.

GuestFebruary 9th, 2009 at 4:31 pm

Free Tibet,I have a question along these lines. I’m not going to dicker with what the Professor said about outsourcing production to emerging markets, but if production is outsourced from a developed country, say the U.S., to emerging ones, say China and India, what is left in the U.S. for people with low-level skillsets? Not everyone has the intelligence, aptitude, or education to be a rocket scientist or economist or a rocket scientist economist. Along those lines, even jobs that require a high level of skill and education are being outsourced. Jobs in fields like engineering, software development, life sciences, journalism, really, just about any kind of job that is the product of intellectual effort. So what is left?

GuestFebruary 9th, 2009 at 4:49 pm

PRAGUE — The Czech Republic will offer a free plane ticket and €500 ($795) to foreign workers who voluntarily agree to return home after losing their jobs in the economic downturn, the government said on Monday…Mr. Langer said many unemployed foreigners lacked cash to pay for a ticket home, as they had been saving to pay excessive fees or bribes — up to $14,500 — to agencies that secured them jobs in the Czech Republic.so why does the government pay to return the surplus workers and not the agencies involved?

MM CAFebruary 9th, 2009 at 4:54 pm

think of it all this way…what is prevalant in our society is cheating, greed, theft, lying, scamming, scheming…. look at AROD and MLB union and the owners and the Commishiner… all for the good of the game, i mean thier pockets…. screw the fan, let the fan pay more…. Wall street is the same… screw the taxpayer… What a country we live in these days… I hope the entire thing collapses and we get the chance to start over… at least watch the rich and powerful squirm… What a sad state…

ALAFebruary 9th, 2009 at 5:05 pm

Once upon a time criminals existed and were easy to catch and put behind bars and the punishment was swift and harsh, discouraging most from crossing the line of right and wrong. That was back in the days of absolutes. Now to call it a criminal act or to imply that some act is criminal is up for debate and many different interpretations will apply. To say any act is criminal is becoming harder to prove as the definition for the act may not be criminal by the new and enlightened standards. The clear line that divided right and wrong is not as straight and bold as it once was and the punishment for crime doesn’t carry with it the deterrence it once did.

HayesFebruary 9th, 2009 at 5:11 pm

sorry I missed that someone had already carried this over from the other thread – but worth repeating anyway – a great set of interviews

GuestFebruary 9th, 2009 at 5:12 pm

Food banks began 26 years ago as a short-term solution to hunger.i guess the wealthy/charity didn’t throw enough money at the problem

GuestFebruary 9th, 2009 at 5:21 pm

Well looks like Geitner and his whipping boy Obama have decided to give it to the U.S. tax payer, meanwhile they fight over relief for common people. Get ready for a great depression one deliberately planned and set up by the bankers to pillage our society. The bankers are obviously taking our money and running while deliberately creating deflation so they can buy up everything for nothing a year from now.Democracy is dead Obama’s a cheating spineless sell out chump.

tutterfrutFebruary 9th, 2009 at 5:27 pm

“Not everyone has the intelligence, aptitude, or education to be a rocket scientist or economist or a rocket scientist economist.”You NEED tens of millions of those to create a multitrillion $ consumer debt subprime paradise and all the phony jobs CREATED with those trillions. (One generation ago most households had only one paycheck)The US(or western economies) didn’t ran out of low skill jobs, they just couldn’t create enough stupids fast enough, to pick up the available credit. :^)

ex VRWCFebruary 9th, 2009 at 5:40 pm

Sure FT, I will jump in. You wrote:

It’s not out-sourcing to take advantage of comparative advantages that is the problem. It is the stupid, stupid, stupid idea of developing an industrial economy for 1300 million people on the basis of cheap energy and the back of an already saturated US consumer market. Plus the ∑ (stupid^n) idea of leveraging the proceeds of that trade into non-productive sectors!

Where did the ‘idea’ of leveraging profits into non-productive sectors originate? Is it not an outgrowth of a system that seeks the best return on investment at all costs? In other words, how does investment seek anything but the fastest, easiest returns (ie, the returns generated by bubble creation in areas such as dot-com, the housing boom, an overlarge financial sector, etc). The inevitable end result is the allocation of capital in the wrong areas. It starts with not recognizing that the economy of a nation is on the wrong path, that the imbalances are forming and need to be corrected.Of course simple protectionist thinking will not solve the problem, notwithstanding the current drumbeat for it now we have the right administration and congress in place. The problem, as you point out, is far more intractable than that, and of course it is compounded by cheap imported energy. But solving the cheap energy problem in a way that enables cheap energy without importing is only the start. What are the rest of the jobs in the economy going to come from?China and India will catch up with us in their ability to build more and more sophisticated things. We will need to address being part of a global economic community at a level that does not presuppose US superiority of standard of living or wages. The notion that this adjustment can come entirely from the demand side of emerging economies is not workable. Because of peak oil, limited global capacity for development, and the slow process of building a sustainable middle class in an EM, it will not happen quickly. Therefore the inevitable outcome of this process if that we and the EM countries move toward each other, not that they move up to us. Guess what, that is a deflationary process for us.The only question that remains is how we get there. Do we get there kicking and screaming by going through trade wars, hyperinflation, shooting wars, collapse, and a disorderly process? Or do we figure out how we adjust and survive and get there in one piece?

MurphFebruary 9th, 2009 at 6:11 pm

I wish the CNBC talking-heads would allow Roubini and Taleb to string a couple words together without interrupting with inane comments!

tutterfrutFebruary 9th, 2009 at 6:12 pm

I had the same sentiment when hearing some of Obama’s speech today(on Bloomberg) from Indiana(I think it was?).It was all trying to revive the existing model.Nothing about living within your means, or downsizing the level of consumption.A generation ago most households could live of one paycheck, which means that less jobs than now were necessary. That women could work was called emancipation, where the result nowadays often is that they have become emancipated debt slaves.Today on Belgian radionews was said that last yeara record number of people(mostly women) took a ‘career break’(system that pays you around 350 euros/month to take care of your children or parents or just take a break up to a few years with ‘same job’ guarantee afterwards).What I want to say is that apart of the discussion if we should manufacture everything ourselves within the same fiscal entity, I think that we should reconsider what we really need, to be happy human creatures and if (GDP)growth is part of that.

GuestFebruary 9th, 2009 at 6:19 pm

may you live in interesting times: SHIP OF FOOLS by Paul Craig RobertsFebruary 8, 2009 — Is there intelligent life in Washington, DC? Not a speck of it.The US economy is imploding, and Obama is being led by his government of neconservatives and Israeli agents into a quagmire in Afghanistan that will bring the US into confrontation with Russia, and possibly China, American’s largest creditor.The January payroll job figures reveal that last month 20,000 Americans lost their jobs every day.In addition, December’s job losses were revised up by 53,000 jobs from 524,000 to 577,000. The revision brings the two-month job loss to 1,175,000. If this keeps up, Obama’s promised three million new jobs will be wiped out by job losses.Statistician John Williams (shadowstats.com/) reports that this huge number is an understatement. Williams notes that built-in biases in seasonal adjustment factors caused a 118,000 understatement of January job losses, bringing the actual January job loss to 716,000 jobs.The payroll survey counts the number of jobs, not the number of employed as some people have more than one job. The Household Survey counts the number of people who have jobs. The Household Survey shows that 832,000 people lost their jobs in January and 806,000 in December, for a two month reduction of Americans with jobs of 1,638,000.The unemployment rate reported in the US media is a fabrication. Williams reports that”during the Clinton Administration, ‘discouraged workers’ those who had given up looking for a job because there were no jobs to be had–were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December.”In other words, without all the manipulations of the data from a government that lies to us every time it opens its mouth, the US unemployment rate is already at depression levels.How could it be otherwise given the enormous job loss from offshored jobs. It is impossible for a country to create jobs when its corporations are moving production for the American consumer market offshore. When they move the production offshore, they shift US GDP to other countries. The US trade deficit over the past decade has reduced US GDP by $1.5 trillion dollars. That is a lot of jobs.I have been reporting for years that American university graduates have had to take jobs as waitresses and bartenders. As over-indebted American consumers lose their jobs, they will visit restaurants and bars less frequently. Consequently, Americans with university degrees will not even have jobs waiting on tables and mixing drinks.US policymakers have ignored the fact that consumer demand in the 21st century has been driven, not by increases in real income, but by increased consumer indebtedness. This fact makes it pointless to try to stimulate the economy by bailing out banks so that they can lend more to consumers. The American consumers have no more capacity to borrow.With the decline in the values of their principal assets–their homes–with the destruction of half of their pension assets, and with joblessness facing them, Americans cannot and will not spend.Why bail out GM and Citibank when the firms are moving as many operations offshore as they possibly can?Much of US infrastructure is in poor shape and needs renewing. However, infrastructure jobs do not produce goods and services that can be sold abroad. The massive commitment to infrastructure does nothing to help the US reduce its massive trade deficit, the financing of which is becoming a major problem. Moreover, when the infrastructure projects are completed, so are the jobs.At best, assuming Mexicans do not get most of the construction jobs, all Obama’s stimulus program can do is to reduce the number of unemployed temporarily.Unless US corporations can be required to use American labor to produce the goods and services that they sell in American markets, there is no hope for the US economy. No one in the Obama administration has the wits to address this problem. Thus, the economy will continue to implode.Adding to the brewing disaster, Obama has been deceived by his military and neoconservative advisers into expanding the war in Afghanistan, a large mountainous country. Obama intends to use the draw-down of US soldiers in Iraq to send 30,000 more American troops to Afghanistan. This would bring the US forces to 60,000–600,000 fewer than US Marine Corps and US Army counterinsurgency guidelines define as the minimum number of soldiers necessary to bring success in Afghanistan–and less than half as many as the army that was unable to occupy Iraq…Where is Obama going to get another half million soldiers to add to the 150,000 to pacify Afghanistan?One answer is the rapidly growing massive US unemployment. Americans will sign up to go kill abroad rather than be homeless and hungry at home.But this solves only half of the problem. Where does the money come from to support an army in the field of 650,000, an army 4.3 times larger than US forces in Iraq, a war that has cost us $3 trillion in out-of-pocket and already incurred future costs.This money would have to be raised in addition to the $3 trillion US budget deficit that is the result of Bush’s financial sector bailout, Obama’s stimulus package, and the rapidly failing economy. When economies tank, as the American one is doing, tax revenues collapse. The millions of unemployed Americans are not paying Social Security, Medicare, and income taxes. The stores and businesses that are closing are not paying federal and state income taxes. Consumers with no money or credit to spend are not paying sales taxes.The Washington Morons, and morons they are, have given no thought as to how they are going to finance a fiscal year 2009 budget deficit of some two to three trillion dollars.The practically nonexistent US saving rate cannot finance it.The trade surpluses of our trading partners, such as China, Japan, and Saudi Arabia, cannot finance it.The US government really has only two possibilities for financing its budget deficit. One is a second collapse in the stock market, which would drive the surviving investors with what they have left into “safe” US Treasury bonds. The other is for the Federal Reserve to monetize the Treasury debt.Monetizing the debt means that when no one is willing or able to purchase the Treasury’s bonds, the Federal Reserve buys them by creating bank deposits for the Treasury’s account.In other words, the Fed “prints money” with which to buy the Treasury’s bonds.Once this happens, the US dollar will cease to be the reserve currency.In addition, China, Japan and Saudi Arabia, countries that hold enormous quantities of US Treasury debt in addition to other US dollar assets, will sell, hoping to get out before others.The US dollar will become worthless, the currency of a banana republic.The US will not be able to pay for its imports, a serious problem for a country dependent on imports for its energy, manufactured goods, and advanced technology products.Obama’s Keynesian advisers have learned with a vengeance Milton Friedman’s lesson that the Great Depression resulted from the Federal Reserve permitting a contraction of the supply of money and credit. In the Great Depression good debts were destroyed by monetary contraction. Today bad debts are being preserved by the expansion of money and credit, and the US Treasury is jeopardizing its credit standing and the dollar’s reserve currency status with enormous quarterly bond auctions as far as the eye can see…To whose agenda is President Obama being hitched? Writing in the English language version of the Swiss newspaper, Zeit-Fragen, Stephen J. Sniegoski reports that leading figures of the neocon conspiracy–Richard Perle, Max Boot, David Brooks, and Mona Charen–are ecstatic over Obama’s appointments. They don’t see any difference between Obama and Bush/Cheney.Not only are Obama’s appointments moving him into an expanded war in Afghanistan, but the powerful Israel Lobby is pushing Obama toward a war with Iran.The unreality in which he US government operates is beyond belief. A bankrupt government that cannot pay its bills without printing money is rushing headlong into wars in Afghanistan, Pakistan, and Iran. According to the Center for Strategic and Budgetary Analysis, the cost to the US taxpayers of sending a single soldier to fight in Afghanistan or Iraq is $775,000 per year! …http://www.vdare.com/roberts/090208_fools.htm

GuestFebruary 9th, 2009 at 6:42 pm

You have to feed, clothe, house, treat, school, secure, finance, bury… unemployed foreign workers. Look at the cost Americans pay to support the low-wage help that corporations import to replace our established workforce — costs Americans must pay even while the foreign workers are employed. And maybe, when times get better, the Czech government will “need” the agencies again…

GuestFebruary 9th, 2009 at 7:04 pm

It sort of depends on who’s defining the crime and who’s defining the criminal, doesn’t it?As Juvenal said: “Many commit the same crime with a very different result. One bears a cross for his crime; another a crown.”Have you ever noticed the jewels in the crowns of Paulson, Rubin, Rockefeller, Perelman, Blankfein, Thain, Mack, Greenberg, Frenkel, Dimon, Immelt, Stumpf, Fuld, Friedman, Fisher Pritzker, Frank, Dodd, Summers…?If you think that “the clear line that divided right and wrong is not as straight and bold as it once was and the punishment for crime doesn’t carry with it the deterrence it once did,” you might try telling the IRS that henceforth you refuse to pay your income taxes. Let me know how it goes.

kilgoresFebruary 9th, 2009 at 7:11 pm

My impression was that Dr. Roubini was expressing disagreement with the current plan, not that the Treasury Secretary “was part of the problem.”As for the CNBC folks, you might as well have had a group of strategically shaved chimpanzees conducting the interview. I wish the same sort of Roubini-Taleb interview could be conducted on The Newshour on PBS, or better yet, by David Brancaccio or Bill Moyers or Charlie Rose.SWK

GuestFebruary 9th, 2009 at 7:45 pm

U.S. Taxpayers Risk $9.7 Trillion on Bailout ProgramsFeb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. The Senate is to vote this week on an economic-stimulus measure of at least $780 billion. It would need to be reconciled with an $819 billion plan the House approved last month.Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed.“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”Financial RescueThe pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps.Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.The worst financial crisis in two generations has erased $14.5 trillion, or 33 percent, of the value of the world’s companies since Sept. 15; brought down Bear Stearns Cos. and Lehman Brothers Holdings Inc.; and led to the takeover of Merrill Lynch & Co. by Bank of America Corp.The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.‘All the Stops’“The Fed, Treasury and FDIC are pulling out all the stops to stop any widespread systemic damage to the economy,” said Dana Johnson, chief economist for Comerica Inc. in Dallas and a former senior economist at the central bank. “The federal government is on the hook for an awful lot of money but I think it’s needed to help the financial system recover.”Bloomberg News tabulated data from the Fed, Treasury and FDIC and interviewed regulators, economists and academic researchers to gauge the full extent of the government’s rescue effort.Commitments may expand again soon. Treasury Secretary Timothy Geithner postponed until tomorrow an announcement that may invite private investment as a way to clear toxic debt from bank balance sheets. Measures that have been settled include a new round of injections of taxpayer funds into banks, targeted at those identified by regulators as most in need of additional capital, people briefed on the matter said.Program DelayThe government is already backing $301 billion of Citigroup Inc. securities and another $118 billion from Bank of America. The government hasn’t yet paid out on any of the guarantees.The Fed said Friday that it is delaying the start a $200 billion program called the Term Asset-Backed Securities Loan Facility, or TALF, to revive the market for securities based on consumer loans such as credit-card, auto and student borrowings.Most of the spending programs are run out of the Federal Reserve Bank of New York, where Geithner served as president. He was sworn in as Treasury secretary on Jan. 26.When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return. Collateral is an asset pledged by a borrower in the event a loan payment isn’t made.Fed SuedBloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn’t received a response to the request.The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).http://www.bloomberg.com/apps/news?pid=20601087&sid=aGq2B3XeGKok&refer=home

Central AlabamaFebruary 9th, 2009 at 7:58 pm

So far Health care has held up as a bright spot in the economy. However the pinch is starting to hit Hospitals and Medical offices. With so many people being laid off and many of those had health ins. provided in whole or in part thru their employer. My question is what will replace the health care industry as it is one of the only industries managing its way thru this financial crisis (or so they say). At some point those uninsured will outnumber those who are insured but those uninsured will still take mama to the doctor.Many people say the Green movement will be the next big thing, but it is too expensive for most people, even with tax credits it’s hard to see the real savings in a $30,000 dollar wind turbine that reduces your energy bill by 1/3 as being the salvation industry for the future, or solar panels that cost as much as your house. I submitted information requesting an online quote asking how much it would cost to rid myself from the Grid, my estimate was $260,000.00 however that quote does provide battery backup. My neighbor paid a small fortune for solar sidewalk lights that produce almost no light at all; He told me it’s embarrassing when people come to the front door with a flash light while the solar side walk lights are burning. I was watching my local news tonight and they had an interview with of all people a house flipper who stated he was down on his luck and had to start renting his flipped houses as he was unable to sale them. One of his houses he had recently finished, this guy looked the part and spoke with personal knowledge of his stupid self inflicted situation. Whatever the government ask me to do I will do just the opposite as it is the only sure way to prosper in America today.

GuestFebruary 9th, 2009 at 7:59 pm

Hi all…here to complain about CNBC’s disgraceful, rude treatment of Roubini and Taleb today. I have to say they are civilized at Bloomberg TV.

AfAFebruary 9th, 2009 at 8:55 pm

Seems that Obama is having a “Bush” moment; except that it will be over the financial crisis rather than global terrorism. We will see which wars we gonna end fighting.13 questions, and none of those pathetic journalists had the decency to ask probably THE most important question “how are you gonna get the money?” instead of some bi-partisan BS.Each time I watch CNN, I end up regretting it.

GuestFebruary 9th, 2009 at 9:01 pm

didn’t you hear? Obama’s going to give free health care to everyone – plenty of demand for health care workers then – problem solved. Huzzah!

FEDupFebruary 9th, 2009 at 9:15 pm

You are assuming we (our leaders) really want to get there. With the disparity in income growing exponentially over this last decade, I think this idea is just another bunch of empty words to keep the economic slavery going just like their plans to fix everything else that is wrong with this country (i.e. we have been talking about energy independence since the 70s!)

blindmanFebruary 9th, 2009 at 9:19 pm

g,prescient. exactly correct. i say barack hussein obama , president of the u.s. is an idiot savant. foreign policy, idiot. domestic energy etc., savant. beter than w., idiot idiot, (no savant), but barack, still not adequate.re. first press conf., coffins coming home. “review”? no! fix it. now. what is stopping this correction? idiocy. influence, overbearing, of “banking industry” and its nation / state political expression, international outcast identity with support of established energy provider industry and “arms” industry, resisting the inevitable innovation. intellect in favor of the established fear and myopia.(intellect denied). resulting in death and destruction of innocent bystanders and other desperate juveniles and many others, ongoing, and providing further marketing incentive to continue down the path to total global destruction. sleep well, systemic collapse will continue in the morning. sun up.

FEDupFebruary 9th, 2009 at 9:25 pm

Got to give him credit he knows what’s coming down the road. BTW, in tonight’s speech Obama has now increased his job creation to 4 million from the 3 million he said less than a month ago.And I absolutely agree, if these stimulus packages don’t do the trick, their ace in the hole is a big war, starting in Afghanistan and ending who knows where.

GuestJLMFebruary 9th, 2009 at 9:25 pm

Dweeb and Larry Kudlow are the CNBC folks I resent the most. Heck, who not throw in everybody on CNBC after SquawkBox. They all seem to love talking over each other and their guests and Kudlow is the worst agitator with Dweeb a close second. I’ve quit watching after 10AM.

FEDupFebruary 9th, 2009 at 9:40 pm

agree. we have too much debt to deleverage and not enough time to do it; hence expect “a straight line recession” for at least a decade, significantly lower standard of living, a glut of over educated graduates with lower paying jobs and further cuts in medical care and social security. Although, the drug companies who make anti-depressants should do quite well!

irving fphelmphFebruary 9th, 2009 at 10:03 pm

nope I don’t agree with you guys. I think he’s got the right stuff. Carter had the right stuff too. Even moreso since his presidency. I wish Americans would line up behind our president. Too much fragmentation. We need to unite.United we stand, divided we fall.

GuestFebruary 9th, 2009 at 10:11 pm

Hi Guest,as to what you are saying, that “The crisis started on Aug 9,2007″, what is that beginning date based on?Thanks

slfFebruary 9th, 2009 at 10:18 pm

Yeah, healthcare for everyone as long as the government gets to tell the doctors what is and isn’t ‘necessary’ for your health.Bloomberg Commentary: Ruin Your Health With the Obama Stimulus Plan—————”Feb. 9 (Bloomberg) — Republican Senators are questioning whether President Barack Obama’s stimulus bill contains the right mix of tax breaks and cash infusions to jump-start the economy.Tragically, no one from either party is objecting to the health provisions slipped in without discussion. These provisions reflect the handiwork of Tom Daschle, until recently the nominee to head the Health and Human Services Department.Senators should read these provisions and vote against them because they are dangerous to your health. (Page numbers refer to H.R. 1 EH, pdf version).The bill’s health rules will affect “every individual in the United States” (445, 454, 479). Your medical treatments will be tracked electronically by a federal system. Having electronic medical records at your fingertips, easily transferred to a hospital, is beneficial. It will help avoid duplicate tests and errors.But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”Keeping doctors informed of the newest medical findings is important, but enforcing uniformity goes too far.”————————–And there’s more..

GuestFebruary 9th, 2009 at 10:24 pm

b.that’s good, that’s good — barack hussein obama, president of the u.s., is an idiot savant… sleep well, systemic collapse will continue in the morning…”No man will ever be safe who stands up boldly against you, or any other democracy, and forbids the many sins and crimes that are committed in the name of the State; the man who is to fight for justice–if he is to keep his life at all–must work in private, not public.” Socrates: Plato’s ApologyUnfortunately for us, Obama appears to be quite safe.sun up, blindman.

GuestFebruary 9th, 2009 at 10:24 pm

Not everyone has the intelligence, aptitude, or education to be a rocket scientist or economist or a rocket scientist economist.

The bigger problem is: the U.S. system was never created to be one where everyone is a rocket scientist or economist or a rocket scientist economist. Do not disparage the grassroot level – the fact is there would not be enough jobs in U.S. for all such highly skilled workers.The situation was different 100+ years ago when people lived off the land (worked at their own farm or someone elses). Nowadays people have to fight for a job at a company.Besides this just shows that if Roubini accepts an unregulated outsourcing, his logic is flawed: unregulated outsourcing will eventually lead to the outsourcing also of highly skilled work.Outsourcing creates a begger-thy-neighbour situation where countries either let the real income levels deteoriate or the unemployment increase. In US they are allowing both to happen, while at the same time talking about the people not having the intelligence to learn. Darwinian bastards…

GuestFebruary 9th, 2009 at 10:38 pm

hmmm…after 9-11 U.S. went after terrorists. Now will they go after accountants?Is there an oil-rich country somewhere were accountants come from?Will we see the beginning of a new “Global War Against [something]“?(I think US loves these sort of terms like “Global” War…sounds cooler that way)

GuestFebruary 9th, 2009 at 11:07 pm

I agree. Yet there’s a tiny silver lining: Roubini’s becoming a man-on-the-street economic factor. Case in point: one of the reporters tonight referenced Roubini when asking Obama – ah, hum, the president — a question. Now that makes Roubini a household word, n’est-ce pas? Let’s hope Obama’s up with the public and didn’t think “Roubini” was a deli sandwich.

ptmFebruary 9th, 2009 at 11:08 pm

Remember back when NR said there would be a silent bank run? Well, Capital Markets Subcommittee Chair, Rep. Paul Kanjorski of Pennsylvania, admits on C-Span today how back on Sept 15th 2008 at 11:00AM the world economy almost collapsed in a matter of hours. “It would have been the end of our political system and our economic systems as we know it.”Skip over to 2 minutes, 20 secondshttp://www.boingboing.net/2009/02/09/rep-kanjorski-550-bi.htmlOther choice quotes “The situation is no different today.” “We are not genius’ in economics.” “We just do not know!”

GuestFebruary 9th, 2009 at 11:24 pm

Yes, great rewards come to some for not paying their taxes. For Geithner? Secretary of the U.S. Treasury. For me? The calaboose.

GuestFebruary 9th, 2009 at 11:40 pm

Obama’s Wealth Destruction by Llewellyn H. Rockwell, Jr.February 10, 2009 –President Obama is under the impression that history owes him $1 trillion right now to spend on whatever he wants. His language is strident and full of irritation that anyone would question his right to live out his personal dream of being Franklin Roosevelt to George Bush’s Hoover. This, he says, is what the election was all about.The arrogance reminds me of George Bush after 9-11, who similarly believed that history owed him a gargantuan war in the tradition of FDR. And look how that arrogance led to disgrace and loss, as he unwittingly presided over the destruction of American prosperity while searching for bugbears abroad.It just goes to show you that the presidency is something like a drug. It makes people lose all connection to reality. Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it. He needs to stop basing his policies on dumbed-down civics texts versions of events and consider the economic logic.With his rhetoric and policies, he has decided to demonize private enterprise, just as FDR did, as a way to present government as the great savior. Now, think about this. If there is a way out of the recession, it will have to be provided by private enterprise. It will come by new businesses, business expansions, entrepreneurship, new technology, and this will be the source of lasting jobs and prosperity.You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.That was also true of Bush’s dumb stimulus program. He was only bailing out his friends at our expense. The effect was to give a little longer life to institutions that were failing anyway. It’s pathetic that the Republicans ever went along with it. You will notice that the scheme didn’t actually work.Well, Obama is doing the same thing, though rewarding a different set of friends.This is not wealth production. This is wealth consumption. Do enough of this nonsense and you can destroy the livelihoods of an entire generation.Americans are proud of their system of government, but consider what it has given us this time around. We had an outgoing president who thought it was his right to grab as much as he could while leaving. Now we have a new president who thinks that the election entitled him to grab as much as he can, right from the beginning. We get looted by the state coming and going. It all amounts to one massive war on prosperity and freedom.Particularly culpable here are the official historians who have for generations heralded FDR as the great savior. It is a case study in how a civic lie can appear and fester for decades. The fact is that the New Deal did not work. It prolonged what might have been a troubling two-year downturn into a horrifying blow to world prosperity that ended up in a war that killed countless millions. It was one of the greatest acts of wreckage in world history.And Obama is inspired by this? He wants to repeat it?I’m not so cynical about human affairs that I believe that errors must be endlessly repeated. Obama can put a stop to his madness. He needs to know – someone must tell him frankly and openly – that his current path is going to lead not to recovery, but to an extension of suffering, and untold amounts of it.The biggest threat facing the American economy right now is rarely even discussed. It is the massive buildup of paper bank reserves in the last quarter of 2008. This was Bush’s doing. He ordered the Fed to print like mad. Fortunately for us, the banks are still holding on to these reserves. When they start lending again, the result could be hyperinflation of Confederate dollar proportions.Hence the priority of the Obama administration should be to first do no evil, and second to find some means for withdrawing those reserves from the banking system before they wash through the economic structure and destroy the dollar. There is still time. He must act. Yes, that will lead to bank failures. That’s good! It will lead to business failures. That’s good and essential too.There simply is no choice. If he acts now, he could find that recovery will come before his second term. This is precisely what happened with Reagan. He was fortunate to have advisers who insisted that he let the liquidation happen rather than attempt to fix the recession of 1981–82 with huge new government spending programs.In any case, the hardest work to do here is intellectual. Obama’s head is filled with myths and lies, not only about FDR and the New Deal, but also about the government’s power to repair the existing economic problems. With this model in his head, he can only do evil. This must change.Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity.http://www.lewrockwell.com/rockwell/is-new-deal-2-inevitable.html

George HarterFebruary 10th, 2009 at 1:06 am

OMG Geithner proposes a Bank Bailout from the private sector.What happens to CITI? Especially when the private sector pays 5% face value on its HUGE amount of derivatives. Isn’t this simply mark to market???Or is it just another Fed boondoggle? Take in a few billions in private money, allow purchases at 5% face, the FDIC/FED then guarantees at least a 25% market value to CITI derivatives to make their bookshappy.Private derivative holders could then sell the notes to the Government after they prove to have litle or no recourse(in 12 months?). Then they leverage out at 25%!! And, at a special LOW tax rate!!!! Maybe Goldman Sachs can even claim a loss on the 20% they steal.OBAMA = Lame DuckGeorge HarterBagdad on the HudsonPS Give me a shot at THAT theft. Yummy, I want some too.

George HarterFebruary 10th, 2009 at 1:14 am

YES. But ONE major difficulty is the AMERICAN populace. Fat, generally complacent and servile. They will whine when their OX is gored, but DO anything?? Have lost faith in THAT happening,George Harter

GuestFebruary 10th, 2009 at 1:28 am

OBAMA looks like the Bush more and more each day. Not a crook himself, rather too stupid to create policy on his own, loves his buds even if he knows they are crooked and best! he enjoys the Lime Light! A Bush clone.Jimmy Carter had some character, at least. Unfortunately for us now, if the Emperor loses his clothes, he will be invisible-There is nothing There!George Harter

MarkFebruary 10th, 2009 at 2:45 am

But everything runs on the edge of being legal. That’s what started all of this. Better is to let such activities crash so that people are more attentive to risky business…Mark

MarkFebruary 10th, 2009 at 2:56 am

Very well stated!Madoff really is just doing what others are doing. There’s this cartoon out there:http://poorbuthappy.com/yourthing/post/madoff-cartoonfunny-but-true/Another example is the recent “discovery” of Alex Rodriguez’s steroid use. Hiws excuse/reasoning? He was doing it because of the pressure of being the highest paid player! Effectively he STOLE money! There should be a class action suit!But this all speaks to the insanity that is this society. Meanwhile children go without health care and food…It’s time to eat the rich.Mark

MarkFebruary 10th, 2009 at 3:01 am

But things can change really fast!Iceland is steamedIcelanders weren’t exactly big activist types.And now you know why the increase in “detention” centers in the US… If truth ever comes out I’ll wager that 9/11 was an attempt to cover up a lot of the financial shenanigans. This has been seen coming a log way off!Cows. Slaughter.Mark

MarkFebruary 10th, 2009 at 3:04 am

A “sell out” means that he switched positions. Nothing (anywhere) indicates (by way of fact) that he did such a thing. Rotten from the beginning.And this, my friends, is the danger of “hope.” It makes you avoid reality, to believe in the Tooth Fairy and the “American Dream.”Mark

MarkFebruary 10th, 2009 at 3:05 am

Stop feeding them! Stop watching!I ditched my TV some time ago (not long enough). They deserve NO money from me!Mark

AnonymousFebruary 10th, 2009 at 3:21 am

I think this person articulated this thought quite well.”In order to create meaningful higher paying jobs which will first reduce consumer debt while also increasing spending and reverse deflation into inflation you need something to create them for. At this late juncture of the economic crisis (as I have said before) the only nationally viable stimulus is through the creation of a war economy – in effect a global war economy.This is a harsh statement, I know. But it is true. And Roubini likely knows it as well but is not saying so for many reasons. But I can say it.The military industrial complex has already indicated this by moving in again into Afghanistan as even General Gates has stated that the Pentagon needs facilitate prioritizing its programs “while fighting two wars at once”. I venture to say that the General is firing but the first salvo in what is likely to become more than two wars indeed under the guise of protecting U.S. resource interests. The White House stimulus package is nothing but an initiating PR camoflauge for the true conflagration being planned and therefore do not be surprised that soon the rest of the $825B package pay-out will be by Obama decree regretably diverted to fight these wars. After all we all must sacrifice. What Obama didn’t tell you is that this sacrifice will very soon require more than financial inconveniences but also this nation’s blood.AM”http://www.rgemonitor.com/roubini-monitor/255304/interview_on_the_us_the_global_economy_and_turkey#148397

MarkFebruary 10th, 2009 at 3:34 am

1/3 of the way through this mess… I think that this is being optimistic, it’s not factoring in the negative exponential impact.Mark

MarkFebruary 10th, 2009 at 3:42 am

Dr. Roubini is right that the model has failed, but HE fails to understand that it cannot be made to work, no matter what corrections are made.Here’s a glimpse of the right direction forward:In the future, economists will return to Earth[excerpt:]“We are dying of consumption,” says Peter Dauvergne, sustainability advisor at UBC and author of The Shadows of Consumption. “The unequal globalisation of the costs of consumption is putting ecosystems and billions of people at risk.”To honestly achieve a “sustainable” economy, humanity must step through a paradigm shift, as profound as the transition in the sixteenth century when Copernicus showed that the Earth is not the centre of the universe. Likewise, ecology teaches us that humanity is not the centre of life on the planet. Just as the Pope’s henchmen refused to look through Galileo’s telescope, some economists avoid looking out the window to see what keeps humanity alive: photosynthesis, precious materials, and concentrated energy.”Sooner or later,” as ecologist David Abram puts it, “technological civilisation must accept the invitation of gravity and settle back … into the rhythms of a more-than-human Earth.”In the 21st century, human enterprise has reached the scale of the planet. We have to account for ourselves on nature’s balance sheet. This is biophysical economics. It appears inevitable. Biophysical culture is what we will make of it.Mark

GuestFebruary 10th, 2009 at 3:48 am

KAL’s cartoon from The EconomistFeb 5th 2009http://www.economist.com/daily/kallery/displaystory.cfm?story_id=13061979

jugglingcdosFebruary 10th, 2009 at 4:34 am

Field Marshal Rommel once said (taken from The Rommel Papers…)People can’t see beyond their noses until difficulties hits em in the eyes (something like that)

Octavio RichettaFebruary 10th, 2009 at 5:01 am

Anyone watched Obama’s press conference yesterday?I did. I give him an A+ (which doesn’t carry into the stimulus package which includes, e.g., outrageous tax breaks for home builders see CR)http://www.washingtonpost.com/wp-dyn/content/article/2009/02/09/AR2009020903701.html?hpid=topnewshttp://www.nytimes.com/2009/02/10/us/politics/10assess.html?hphttp://www.salon.com/news/feature/2009/02/10/stimulus/http://www.reuters.com/article/newsOne/idUKTRE5190Q620090210?virtualBrandChannel=10112http://www.ft.com/cms/s/0/5558582c-f71a-11dd-8a1f-0000779fd2ac.htmlhttp://online.wsj.com/article/SB123419281562063867.html

PeterJBFebruary 10th, 2009 at 5:09 am

From Mish:”Why not get it over with? Just give every bank in the country $1 trillion and be done with it. But if you do, don’t expect any results, because it is still insane to lend when there are not any jobs.”Well, that’s what they want to do and will eventually do anyway so why not just do it? The details are merely in the “earmarks” and “pork”.Get it over with!Ho hum

painterFebruary 10th, 2009 at 5:11 am

Mental incest. They feed themselves their own impotence. they are not able to see beyond the illusion. Wall st and banks are not real. We give them power, they do not give us power.

MorbidFebruary 10th, 2009 at 5:11 am

Eco-human Economic Balance =’s Population About 0.5 BillionMark,Forgot where I read this but it seems, in keeping with your cited article, that we need to shrink the human population. Well, I doubt that there is the political will to do that so perhaps NATURE, through a Black Swan event will help us – something that seems to be brewing in the pandemic flu arena.

Panasonic Corp. has instructed Japanese workers assigned to parts of Asia, Africa, Eastern Europe and South America to send family members back to Japan because of the risk of outbreaks of new influenza strainsThe above comments indicate Panasonic is taking the looming pandemic seriously. Most countries have stockpiled vaccines that will have little use after a pandemic begins, which is also true of Tamiflu. In contrast, Japan has plans to use its 20 million doses of vaccine for the implementation of a pre-pandemic vaccination campaign that will involve first responders and may significantly expand into the general population.Many countries have stockpiled clade 1 vaccines, which are nearing expiration and will have little utility after a pandemic begins.

Pandemic Concerns

g AntonFebruary 10th, 2009 at 5:12 am

It seems to me that the more these do-gooder people do, the worse it gets. Probably part of the problem is that these politicos feel that they have to do something (even if it’s something really stupid), but they feel that the least they have to do is put on a good (how-be-it astronomically expensive) show.Anyway, my personal opinion is that the best thing these fixers could do is nothing–the mess will clean itself if they just leave it alone and let it do so, and even if it won’t, what they are doing is counter-productive, delays the inevitable, and is very expensive–doing nothing would cause much less damage, and would be much cheaper.

PeterJBFebruary 10th, 2009 at 5:18 am

” -doing nothing would cause much less damage, and would be much cheaper. “You forgot, ‘and also much more intelligent’.Ho hum

GuestFebruary 10th, 2009 at 5:48 am

‘A Decade And A Half Of Downturn’

The current economic downturn will be worse than the Great Depression, Gordon Brown’s closest ally has warned.Children’s Secretary Ed Balls said the crisis was “the most serious global recession for over 100 years”, and its effects would be felt for a decade and a half.He also raised fears that it could spark a 1930s-style resurgence of the far-right.The comments – easily the gloomiest yet from a senior member of the Government – came in a speech to Labour activists in Yorkshire at the weekend.”We are now seeing the realities of globalisation, though at a speed, paces and ferocity which none of us have seen before,” Mr Balls said.”The reality is that this is becoming the most serious global recession for, I’m sure, over 100 years as it will turn out.”

(source: http://uk.biz.yahoo.com/10022009/140/decade-half-downturn.html)

GuestFebruary 10th, 2009 at 5:52 am

how about every citizen one trillion?And to please the globalization-advocates here, US government should give every human on the planet one trillion. After all the globalization advocates lurking here want US to support (directly or indirectly) people and businesses in countries outside of US. As if US has some moral obligation to do so. Weird.

The AlarmistFebruary 10th, 2009 at 6:33 am

About the bonus issue … The rule would normally be, “No profits, no bonus.”The bankers have been playing this game of “pay us or we will walk” for years, win or lose. That played when there were actually other banks to walk to, and that played even at banks with losses not so much because there were other banks to walk to but because if you didn’t go along with the game, you didn’t get your package when you pulled the string.The other facet of this bogus … sorry, I mean ‘bonus’ … game is the “But I delivered my numbers, so why are you punishing me?” The easy answer to that is, “Sorry, but you are part of a team. If you feel really strong about this, then you are free to raise your own capital and start your own firm and pay yourself the bonus you see fit to take.” That didn’t play because the wizards of smart could actually find capital in other places and do just that.But this year, there are no profits, and the outlook for the future of many of these business lines is pretty bleak … the Answer should simply be “While you are on our dime your bonus will come out of this year’s profits … this year there are no profits. The music has stopped, so take a seat.”

MedicFebruary 10th, 2009 at 6:57 am

Sure. There’s going to be a huge sale attended by Santa, the Easter Bunny and the Tooth Fairy. They’re all big spenders.

GuestFebruary 10th, 2009 at 6:58 am

http://www.thestreet.com/story/10462740/1/opinion-why-the-stimulus-will-fail.html“stimulus will harm most Americans who have jobs, own businesses, pay taxes, and save money. That’s what happens when you create an environment of rising interest rates, higher inflation, declining currency value and enormous future government debt to repay.”But TARP III/IV/V and STIMULUS II/III/IV/V will keep comming to hurt the hard working American and favor Wall Street CEO and lazy Peter. NO, WE CANT.

GuestFebruary 10th, 2009 at 7:15 am

feel like not going to work. what for, so my hard-earn money can be robbed by higher tax under Obama and Democrat or lose value under high inflation? Why is my money robbed and given to Wall Street executives and lazy Peter. feel like to become lazy Peter too.

GuestFebruary 10th, 2009 at 7:23 am

CNBC reports on ban bailout:”This plan could come in one of two ways: either the investor could be insured against further losses below a certain level after purchasing assets, or the government could finance the purchase of those assets.”Sounds like the government is the new AIG but with tax payers money-investors risk nothing tax payers and the real economy is put at risk. If that’s not bad enough what if the government finances the purchases and then insures them on top of that? Time to move to Canada

HayesFebruary 10th, 2009 at 7:25 am

choreographed brilliance in communication, not to suggest that is a replacement for substance but for the typical fan of Reality TV it may as well be – Obama and his handlers are brilliant -Separately it is logical and a no lose proposition to talk down the economy as much as possible at this juncture – the irony is that it is likely worse than he and his inner circle understand

MorbidFebruary 10th, 2009 at 7:26 am

Yes,It’s a “perfect storm” of events kind of thing – just trying to keep some of those marbles in play.

HayesFebruary 10th, 2009 at 7:36 am

That’s what you get when the creators of this crisis are called on to solve it. Govermnent issued CDS – the audacity of these guys – and the American people don’t have a clue.Taleb is correct stating that Roubini needs to be brought in.

HayesFebruary 10th, 2009 at 7:41 am

From NCGeithner Bank Bailout Plan: Fiasco

That one word assessment of the Geithner plan, as previewed in the New York Times tonight, comes from reader Scott, and is good enough to print.I am so disgusted with this entire proceeding that I am going to dispatch it quickly.Let’s start with the basics. The US banking system is insolvent. Got that? Insolvent. That does not mean every bank in the US is toast, in fact quite a few are probably just fine, and another large group is no doubt hurting and undercapitalized, but a couple of years of not shooting themselves in the foot again would enable therm (via earnings) to rebuild their equity bases sufficiently to proceed more or less as normal. Read more

HayesFebruary 10th, 2009 at 7:49 am

forgot to add that their infiltration into the media is to the extent that CNBC has even themed today’s programming as ‘TURNING the CORNER”

GuestFebruary 10th, 2009 at 7:50 am

Sounds like a complicated front end designed to deceive and ultimately be used as a backdoor for ripping off tax payers!

GuestFebruary 10th, 2009 at 7:54 am

Enough of the lazy Peter nonsense lazy peter eats beans in a can on his $100 dollar food stamps a month I can assure you that this is not how you are getting ripped off. Stop giving the elitists oligarch excuses and cover for taking 99% of the money while you blame the other 1% losses on the poor-it’s ridiculous!

GuestFebruary 10th, 2009 at 7:56 am

They are duplicating the Lone Star Model( 75% financing of the 22 cents on the dollar purchase of Merrill assets), but with the Government Guarantee of the downside risk. If I recollect well in the Lonestar situation, they could only lose their 25% and Merrill covered the downside. The taxpayer will pay the bills in the future. The United States of Ambac is not a good model for a bank bailout, unless you enjoy the thought of generations of taxpayer debt slaves as your descendants. Even if they impose this scam on us, it is very possible that it will not work.The professor was very clear in his ten points.You must clear the Debt Overhang to allow debt service or there is no credit market. Who are the banks going to lend to if everybody hastoo much debt. The massive debt restructuring will happen piecemeal with bankruptcies or organized with Debt Restructuring in all sectors. They may just rip us off, and still screw things up by not instituting debt restructuring conditions. Professor please callGeithner!

TfTFebruary 10th, 2009 at 8:14 am

Start your engine(s), Timmy~(It looks like Turbo Timmy has started his turbo engine(s) in earnest. Does Timmy do a good job for his masters who are definitely not the PEOPLE?? And where is HeliBen!!)From NY Times,Geithner Said to Have Prevailed on the Bailout

The Obama administration’s new plan to bail out the nation’s banks was fashioned after a spirited internal debate that pitted the Treasury secretary, Timothy F. Geithner, against some of the president’s top political hands.In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.

Same ol' same ol'February 10th, 2009 at 8:20 am

He is superb at keeping you fooled. Not a word about the universal healthcare-for-all we could have for what we spend now and the vast majority has repeated said they want, not a word about reducing the insane militarism, cost of which is killing us – no, he’ll go on trading bright futures for profits for warmongers – not a word on land monopolization reform, not a word on ending the war on drugs, not a word about cayman island bank accounts or how this country used to tax the rich and that’s what brought prosperity……….Obama is a trojan horse. Burn that into your brain.

GuestFebruary 10th, 2009 at 8:23 am

Ha! you really believe Roubini could just give Geithner a call and all would be well? Do you really think Geithner doesn’t already know Roubini’s position? Of course he does and he doesn’t care. We all need to plainly admit to ourselves that something much more sinister is at large this is not just a case of miscommunication or naivety. They know what they are trying to do is wrong yet are still audacious, self-serving, and powerful enough to ignore the publics cries.Governments message to the people:We the bankers are your government and we will steal from you as we please even in broad day light against your wishes. Democracy and freedom are not real and we are and have always been the controllers of your fate!In other words an open act of war has been declared on the American people!

MarkFebruary 10th, 2009 at 8:37 am

Power, but power can only come about from surplus, and we’ve done run out of surplus… you know, that finite planet thing!Mark

risk takerFebruary 10th, 2009 at 8:37 am

I hope this doesn’t offend anyone as it may sound anti-semetic which I’m clearly not as I have many Jewish friends and untold love and respect a lot of Jewish people however is it possible that there is some kind of “Jewish mafia” that controls the central banks-it sure does seem that way? With ties perhaps to APAIC etc.?Of course they would only be Jewish descendants because clearly their lack of morals would make them anything but spiritually inclined.

GuestFebruary 10th, 2009 at 8:51 am

Now when all the wealth has been sucked off the bottom of the real economy and given via financial consortiums to the plutocrats we should do nothing?No. Every penny put at the bottom of the economy into what actually benefits working people is good. Every penny that is not directed there is bad.Removing the aid to states and municipalities is just costing more jobs by the hour – but you just watch where the money that DOES go to cities, etc. gets spent. (This below is from a libertarian website, but even stopped clocks are right twice a day and they are correct on the increasing police state that just can’t surveil us enough.)http://www.theagitator.com/2009/02/09/any-taxes-you-pay-can-and-will-be-used-against-you/Any Taxes You Pay Can and Will Be Used Against YouMonday, February 9th, 2009Reason contributor Trey Garrison looks at the stimulus wish lists of cities in Texas, and finds lots of toys for cops:• Frisco wants $125,000 for an armored vehicle and $200,000 for a mobile command vehicle. You know, for all that gang tank warfare going on up in Frisco.• McKinney wants $5 million for SWAT toys and stuff.• North Richland Hills wants $51,000 for volunteer patrol volunteers. Let’s throw in $10 for a dictionary so they can look up the word “volunteer.”• Irving wants $5 million for biometric scanners, digital cameras, RFID scanners — nothing Big Brother there.• Grand Prairie wants $1.25 million for nicer landscaping around the public safety building.• And finally, Arlington is really gearing up for urban warfare. Arlington wants $1.6 million for SWAT toys like military grade carbines, $625,000 for unmanned aerial surveillance drones, and $130,000 for “covert ops”…more equipment for those deadly but camera-friendly no-knock raids…It isn’t just in Texas. For example, I’m thinking the last thing Frank “Worst Mayor in America” Melton of Jackson, Mississippi needs is a Bearcat armored tactical vehicle.Other examples:• Sparks, Nevada wants $600,000 to purchase a “live fire” house its SWAT team can shoot up, and another $420,000 for a SWAT armored vehicle.• Pleasanton, California wants $250,000 to buy a vehicle for its SWAT team.• Gary, Indiana wants $750,000 for a host of “modernization” upgrades to its police department, including “sub-automatic machine guns” and an “armored vehicl” [sic].• Hampton, Virginia wants a whopping $3.5 million for “Air Tactical Unit Support and Equipment,” which I’m pretty sure means they want a sweet helicopter for the SWAT team.• Ottawa, Illinois (population: 18,307) wants $60,000 to purchase, among other things, five “tactical entry rifles.”• Glendale Heights, Illinois wants $96,000 to purchase red light cameras, and another $67,000 to hire someone to monitor them.• Toward a more Orwellian America! The following cities requested stimulus funds to supplement, initiate, or upgrade public surveillance camera systems: Brockton, Massachusetts; Buffalo, New York; Burnsville, Minnesota; Caguas, Puerto Rico; Cerritos, California; Columbia, South Carolina; Compton, California; Homestead, Florida; Hormigueros, Puerto Rico; Indianapolis, Indiana; Inglewood, California; Lewiston, Maine; Lorain, Ohio; Lynn, Massachusetts; Marion, Ohio; Merced, California; New Rochelle, New York; North Richland Hills, Texas; Oakland, California; Orange, New Jersey; Orem, Utah; Orlando, Florida; Pembroke Pines, Florida; Ponce, Puerto Rico; Riverdale, Illinois; Shreveport, Louisiana; Silver City, New Mexico; Sumter, South Carolina; Tallahassee, Florida; Warren, Ohio; and Wilkes-Barre, Pennsylvania.Winston-Salem, North Carolina requested just under $85 million in security-related stimulation. But top prize goes to Tulsa, Oklahoma, which is asking the rest of the country to stimulte its economy with a whopping $135 million in public safety-related requests.All in all, America’s mayors asking for a little over $5.5 billion in public safety “stimulus.”

edwardbFebruary 10th, 2009 at 8:54 am

“”Jewish mafia” that controls the central banks-it sure does seem that way”.Why Jewish ? Why ‘sure does seem that way’?

HayesFebruary 10th, 2009 at 8:55 am

Taleb was calling for replacing Turbo Timmy Geithner with an individual such as Robuini who is not beholden to special interests

GuestFebruary 10th, 2009 at 9:00 am

thanks very much for your post – thanks for speaking up to this nonsense. the guest above you will have a boiled conniption fit if – god forbid – some slacker’s kid eats a free lunch at school, and his posts give cover to the thieving welfare kings who have all the money.

GuestFebruary 10th, 2009 at 9:09 am

And Schumer wants our guns.”The great are great only because we are on our knees. Let us rise!” Max Stirner — The Ego and His Own

GuestFebruary 10th, 2009 at 9:16 am

I am sure we will get more developments (from this crisis) that moves this world toward a specific direction more conductive to certain not-yet-publicized plans. After all, that is the sort of developments we got from 9/11: loss of civil rights, domestic spying, more executive power to the Prez, etc.This economical crisis may not lead to further changes of such nature, but will likely lead to further changes involving either restrictions or increased government influence over peoples finances (directly or indirectly, e.g. by owning employers and banks).Eventually the governments will come public with their plans. They just need to set up the world so that the plans can be carried out quickly. Or what did you think was the reason for sites like google and facebook to collect all that data. Even if they do not use the data themselves it will get used by those whom they provide it to.In the end they just need a public excuse. That will come in the form of the next crisis (this one and 9-11 were not excuses for the final act, these were needed to excuse the “configuration changes”…changes in law etc).—P.S. Both the 9/11 situation and this one were brought to us by US government (as explained e.g. here: http://www.ae911truth.org). Obama should set up a new 9-11 truth commission. But will he? Likely not? Why – I thought he was supposed to be “different”?

GuestFebruary 10th, 2009 at 9:19 am

having spent years wading deep into that dark territory, risk taker, I know why you ask, but the simple answer is, it’s not that simple. Are there rich and powerful Jews? Sure are. Are they running the world? Yes – along with rich and powerful people of every stripe and shade. My personal opinion is that the rich and powerful ones who are NOT Jewish want all the opprobrium to fall on their chosen scapegoats so they can hide themselves behind that very convenient and constantly re-run ruse.Keep your scope wide as possible, or you’ll miss the bigger picture is my advice.The Germans lost WW2. The Nazi’s and Fascists didn’t.

GuestFebruary 10th, 2009 at 9:27 am

http://www.michaelparenti.org./afghanistan%20story%20untold.htmlFrom Michael Parenti, about Afghanistan (and Obama’s plans there and the US’s determined history of always thwarting anything that smacks of actually helping people instead of wealthy profiteers)snipSome Real HistorySince feudal times the landholding system in Afghanistan had remained unchanged, with more than 75 percent of the land owned by big landlords who comprised only 3 percent of the rural population. In the mid-1960s, democratic revolutionary elements coalesced to form the People’s Democratic Party (PDP). In 1973, the king was deposed, but the government that replaced him proved to be autocratic, mismanaged, and unpopular. It in turn was forced out in 1978 after a massive demonstration in front of the presidential palace, and after factions of the army intervened on the side of the demonstrators.The military officers who took charge invited the PDP to form a new government under the leadership of Noor Mohammed Taraki, a poet and novelist. This is how a Marxist-led coalition of national democratic forces came into office. “It was a totally indigenous happening. Not even the CIA blamed the USSR for it,” writes John Ryan, a retired professor at the University of Winnipeg, who was conducting an agricultural research project in Afghanistan at about that time.The Taraki government proceeded to legalize labor unions, and set up a minimum wage, a progressive income tax, a literacy campaign, and programs that gave ordinary people greater access to health care, housing, and public sanitation. Fledgling peasant cooperatives were started and price reductions on some key foods were imposed.The government also continued a campaign begun by the king to emancipate women from their age-old tribal bondage. It provided public education for girls and for the children of various tribes.A report in the San Francisco Chronicle (17 November 2001) noted that under the Taraki regime Kabul had been “a cosmopolitan city. Artists and hippies flocked to the capital. Women studied agriculture, engineering and business at the city’s university. Afghan women held government jobs—-in the 1980s, there were seven female members of parliament. Women drove cars, traveled and went on dates. Fifty percent of university students were women.”The Taraki government moved to eradicate the cultivation of opium poppy. Until then Afghanistan had been producing more than 70 percent of the opium needed for the world’s heroin supply. The government also abolished all debts owed by farmers, and began developing a major land reform program. Ryan believes that it was a “genuinely popular government and people looked forward to the future with great hope.”But serious opposition arose from several quarters. The feudal landlords opposed the land reform program that infringed on their holdings. And tribesmen and fundamentalist mullahs vehemently opposed the government’s dedication to gender equality and the education of women and children.Because of its egalitarian and collectivist economic policies the Taraki government also incurred the opposition of the US national security state. Almost immediately after the PDP coalition came to power, the CIA, assisted by Saudi and Pakistani military, launched a large scale intervention into Afghanistan on the side of the ousted feudal lords, reactionary tribal chieftains, mullahs, and opium traffickers.SnipOne might agree with John Ryan who argued that if Washington had left the Marxist Taraki government alone back in 1979, “there would have been no army of mujahideen, no Soviet intervention, no war that destroyed Afghanistan, no Osama bin Laden, and no September 11 tragedy.” But it would be asking too much for Washington to leave unmolested a progressive leftist government that was organizing the social capital around collective public needs rather than private accumulation.US intervention in Afghanistan has proven not much different from US intervention in Cambodia, Angola, Mozambique, Ethiopia, Nicaragua, Grenada, Panama, and elsewhere. It had the same intent of preventing egalitarian social change, and the same effect of overthrowing an economically reformist government. In all these instances, the intervention brought retrograde elements into ascendance, left the economy in ruins, and pitilessly laid waste to many innocent lives.The war against Afghanistan, a battered impoverished country, continues to be portrayed in US official circles as a gallant crusade against terrorism. If it ever was that, it also has been a means to other things: destroying a leftist revolutionary social order, gaining profitable control of one of the last vast untapped reserves of the earth’s dwindling fossil fuel supply, and planting US bases and US military power into still another region of the world.In the face of all this Obama’s call for “change” rings hollow.read the rest at the link

HayesFebruary 10th, 2009 at 9:30 am

So at what moment does the PPT arrive today – Geithner at 11am – Senate vote an hour or so later and Obi speaks up the road in Ft. Myers on the despair and despondency here in FL — with S&P off 12 and the Dow down 102 – the setup for a nice reversal is in place — of course there is the nagging doubt that it’s different this time and Mr. Market won’t get fooled again

GuestFebruary 10th, 2009 at 9:31 am

“Taleb was calling for replacing Turbo Timmy Geithner with an individual such as Robuini who is not beholden to special interests”I can’t blame you for asking but unfortunately I think you’re dreaming.

GuestFebruary 10th, 2009 at 9:40 am

I couldn’t agree more, but “they” won’t be stopped until we learn to think outside the box and see that all this nightmare is just what wealthy, powerful people do. For as long as we allow anyone to get that much power, they’ll keep using it against the rest of humanity.Capitalism is too powerful a weapon to let anyone get that much wealth and power. Character runs the gamut from good to evil in any religious group, any ethnicity, any group at all – and the very worst sorts from any group are always the ones who want control, influence, power to put themselves above the law, power to conceal their true identities and deeds.someday this common sense will dawn on everyone.

Bob nailed it, eh?February 10th, 2009 at 9:51 am

Everything Is Broken – Bob DylanBroken linesBroken stringsBroken threadsBroken springsBroken idolsBroken headsPeople sleeping in broken bedsAin’t no use jivin’Ain’t no use jokin’Everything is broken.Broken bottlesBroken platesBroken switchesBroken gatesBroken dishesBroken partsStreets are filled with broken heartsBroken words never meant to be spokenEverything is broken.Seem like every time you stop and turn aroundSomething else just hit the groundBroken cuttersBroken sawsBroken bucklesBroken lawsBroken bodiesBroken bonesBroken voices on broken phonesTake a deep breath – feel like you’re chokin’Everything is broken.Everytime you leave and go off someplaceThings fall to pieces in my faceBroken handsOn broken ploughsBroken treatiesBroken vowsBroken pipesBroken toolsPeople bending broken rulesHound dog howlin’, bullfrog croakin’Everything is broken.

GuestFebruary 10th, 2009 at 9:57 am

so they will soon propose a new model of supervision and regulation of the financial system.It will of course involve some sort of supra-national body or cross national influence in any case. Or let’s just be blunt: UN – not necessarily control by UN but could be control through UN (i.e. existing government stay but control the world finances through UN).

Sam AdamsFebruary 10th, 2009 at 9:58 am

no way. i’ll stand and fight for my country and for what is right – whether you fascist defenders of the wealthy plutocrats like it or not. bite me, you little fearful fraction – and taste a true patriot’s blood.

blindmanFebruary 10th, 2009 at 10:06 am

a,there is a huge difference between growth and development. war is the antithesis of development while it may be considered growth.ecologic energy revolution is the sane choice , not war.as a form of diplomacy it defeats it’s own purpose. economically it is a product with no value(human). etc.. etc.we are flirting with our own devastation, again.

GuestFebruary 10th, 2009 at 10:33 am

market is realizing STIMULUS will hurt economy and main street in long run. Start to price in Democrat-led Depression.

Bruce the Tool MakerFebruary 10th, 2009 at 8:26 pm

Hey George, I sense you are on to something. But not being fluent in finacial lingo I would love to read a “Stealing for Dummies” version of your post.Bruce

snsFebruary 11th, 2009 at 10:39 am

Roubini: you said earlier that you did NOT pull your investments from the market before the recession that you predicted hit. Now in this recent blog you claim to not have any investments in the market. Is the latter due to the former? In other words, despite seeing it coming you LOST money and now have no more investments hence you can claim that “I never trade in markets and so I am never “talk my book” when I present my views.”Perhaps you should better define what you mean by “markets” since you explicitly admitted to losing money in your stock market investments.

Gaynelle FehringerJune 8th, 2011 at 7:50 pm

A lot of thanks for all your valuable hard work on this site. My niece really likes managing investigation and it is easy to understand why. My spouse and i learn all relating to the lively ways you convey very useful tricks through the blog and as well inspire participation from some others about this situation then our daughter is in fact learning a whole lot. Enjoy the rest of the year. You are always doing a pretty cool job.

nyc hotelsJune 9th, 2011 at 4:24 am

I simply had to appreciate you once again. I’m not certain the things that I might have created in the absence of the entire aspects provided by you over such problem. It became a hard dilemma in my circumstances, however , looking at a expert approach you dealt with the issue forced me to cry over joy. Now i’m happy for your help as well as have high hopes you comprehend what a powerful job your are carrying out teaching others by way of your site. I am certain you haven’t encountered all of us.

malibu hotels caJune 9th, 2011 at 11:07 am

I really wanted to construct a simple note so as to appreciate you for these awesome recommendations you are placing at this site. My incredibly long internet look up has now been honored with awesome facts and strategies to exchange with my companions. I would point out that many of us visitors are really endowed to be in a fabulous website with very many perfect professionals with great secrets. I feel extremely fortunate to have come across your entire webpages and look forward to some more thrilling moments reading here. Thanks once again for a lot of things.

creative agencies surreyJune 15th, 2011 at 11:01 pm

You’ll find some intriguing details in time in this particular article but I don’t know if I see all of them center to heart. There is some validity but I’ll consider hold viewpoint until I search into it additional. Great article , thank you and we want far more! Additional to FeedBurner also

Most Read | Featured | Popular

Blogger Spotlight

Dan Steinbock

Dr Dan Steinbock is a recognized expert of the multipolar world. He focuses on international business, international relations, investment and risk among the major advanced economies (G7) and large emerging economies (BRICS and beyond).

Economics Blog Aggregator

Our favorite economics blogs aggregated.