Marketplace

Regarding Raymond Thibodeau’s report on outraged Indian H-1Bs exclusion from the Stimulus program:

The unemployment line forms BEHIND unemployed United States Citizens.

Scott - There’s a financial/economic disconnect that doesn’t seem to have been picked up by the financial media. Right now the consensus view is that the banking system is in full collapse and that many large banks are insolvent and we need trillions of dollars to bail them out. I’ve seen numerous articles that put the price tag for the bailouts in excess of a trillion.

Yet to date, no accounting has been made of the scope of the problem from the US government and in fact the FDIC’s reports are saying that most banks are profitable and well capitalized. (See Sheila Bair’s testimony.) Most large banks reported profits for Q1 and are saying they don’t need any more money, and that they didn’t want it in the first place. So how did Paulson come up with $700B initially and where are the new trillion dollar estimates coming from if the banks and the FDIC are saying that they’re well capitalized? The macro statistics at the FDIC say that the industry has more than $1.3T of equity and only had $26B of losses in Q4, and much of that was in previously defaulted institutions.

I have some industry experience in the banking/regulatory industry and have some contacts, including my former boss who won awards for his risk management work with GNMA after the S&L crisis. I would be happy to help you follow up on the analysis.

I would like to know more about the inevitable turn around, and signs that point to it. I figure China and India are spending billions on infrastructure, the US has stimulus, and the UK has stimulus. All that money entering the Global economy is going to lead to inflation, at some point, but in the mean time all that spending must be good for business. What companies are getting that business? Who sees these days as the start of the best days ever?

Also, I would like to hear how rough inflation will be on people who are unemployed or under-employed. I would like to hear about how inflation hurts people who are taking pay cuts instead of getting laid off entirely.

Finally, I figure that commodity prices are going to zoom right up again sometime soon. $5 per gallon gas was less than a year ago. Big retailers were limiting how much rice people could buy. Food prices were high. Is anything being done now - in the eye of the commodity price storm - to get ready for the return to high prices?

I would like the full story on credit default swaps. How the wording on desribing these instruments avoided regulation. Who were the officials in government and industry that allowed this to happen? Additionally, can AIG and others essentially be money laundering TARP funds to foreign banks becuase they are in-eligible for TARP. These foreign banks are also getting funds from their own country’s stimulus programs, essentially double dipping. Is this correct?

Scott,

I would like to hear more stories about the positive aspects of this financial crisis; the silver lining if you will. Call me an optimist, but I believe that we will come out of this better than we went into it, with many Americans having learned the hard way that living within their means is everyone’s responsibility. I am sick and tired of depressing news stories about how everyone is angry at greedy rich people; I want to hear about happy poor people. The best things in life are free, after all.

Scott,

I really love the blog! Please keep up the good work.

Your coverage of the crisis has been excellent, but I think you might be missing an opportunity to broaden the discussion. Many believe we are currently experiencing a paradigm shift, rather than a normal part of the economic cycle. There’s a compelling argument that American capitalism, as we know it, is dead. Accordingly, I think now is an appropriate time to begin scrutinizing some of the principles at the foundation of our economy.

For instance, is “growth,” as we’ve classiclly defined it, a worthwhile goal? Is more still better? These type of questions go to the heart of what type of economy we want to have. Conveniently, it seems we will be spending our foreseeable future rebuilding our economy. We need not rebuild the same economy. We definitely should not be perpetuating the practices that got us into this mess ine first place. In light of the many challenges people all over the world are facing, rebuilding the economy with a focus on sustainability would be preferable.

Perhaps start with food. If we want an food industry that works for us, rather than for the giant ag corporations, why not get rid of government subsidies and encourage citizens to grow victory gardens, or rename the Department of Agriculture the Department of Food. Eating locally is good for the environment and drives down health costs. This type of policy would have little inherent cost (we’d actually save by ending the subsidies, and promoting victory gardens is cost free), and would do the society a ton of good.

Just my two cents. I know this type of fare isn’t red meat for econo-philes, but if we do not discuss these fundamental questions now, when will we?

Tagging along with stories about happy poor people, and inflation’s future effect on us, can we talk in concrete terms about what it means to be poor or rich? Maybe it would help some of us get some perspective and realize just how much we have to be happy about. I heard a story a few weeks ago on the evening Marketplace report that flippantly referred to $13 an hour as being a low wage in Alabama—oh, poor lunch lady. I live in Louisville and $13 an hour is what I hope desperately to someday earn (and I work for a Bank!) What is poverty, REALLY, in our country, and what does it mean to quiver on the edge of that line? Is the definition of rich merely to make more money that I do now? So then, ‘rich’ is always out of reach, or is there an actual dollar figure that defines it?

Are credit default swaps still legal?