I’m discussing Treasury’s bank bailout plan with Brad DeLong, Mark Thoma, and James Kwak over at Seeking Alpha right now; I’d embed the discussion here, but the column width makes it uncomfortably cramped. So come on over and join in!
I have a bloggingheads diavlog with William Cohan, who’s out plugging his new book on the collapse of Bear Stearns. Of course we talk about subsequent collapses too, like Lehman and AIG, and what caused them, and whether it’s possible to prevent them. At least we know from Lehman and AIG that the Bear collapse wasn’t entirely a function of the fact that Jimmy Cayne spent too much time playing bridge.
Anke and I have estimated the proportion of Africa’s private wealth that is held outside the region. By 2004 it had reached the astounding figure of 36 percent: more than a third of Africa’s own wealth is outside the region.
One further thought about the Geithner bailout plan: a lot of relatively small and new public-private investment partnerships are going to be issuing debt with an FDIC wrap. In pratice, that’s likely to mean bonds with no credit risk but with a large illiquidity premium. If you’re a risk-averse retail investor who doesn’t want to take credit risk but who’s also scared of the Treasury bubble, this could be a sensible investment. You get none of the upside, none of the downside, and a large part of the implicit subsidy. It’s just a pity that it’s so hard for retail investors to buy bonds in the US.
I had a brief discussion with Jesse Eisinger yesterday about the stock market reaction to the Geithner plan. The central question: do you look at the level of the index, or do you look at the amount that it moved over the course of the day? Geithner’s first attempt at introducing the plan resulted in the Dow falling 382 points to 7,889; Geithner’s second attempt saw a 497-point rise to 7,776.
John Hempton says that I’m misrepresenting his views. He doesn’t think that the banks should just be allowed to muddle along indefinitely: they should be subjected to price discovery (eg the Geithner plan) and then nationalized if they’re found to be insolvent:
It’s the invite everybody wants to have gotten: were you invited to join Treasury’s econoblogger conference call? Clusterstock, Dealbreaker, and Paul Kedrosky found the golden ticket in their inboxes, and Brad DeLong asked a question — although one would hope that Treasury would be talking to him informally anyway.