Apparently, the U.S. economy is being held back by massive uncertainty over new regulation, future taxation and the deficit and how it will be handled, a state so frightening and confusing that investors won’t invest, businesses won’t hire and nervous consumers have taken to their beds.
The Great Debate
At a time when public spending and deficits are ballooning on both sides of the Atlantic, taxes are rising and governments are enacting far-reaching reforms to financial regulation, healthcare and carbon emissions, it might seem strange to talk about the withering away of the state as an economic and industry regulator.
A year after Lehman Brothers collapsed, policymakers are still getting to grips with the key question raised by the Wall Street firm's fall: how to ensure that the failure of a large bank does not jeopardise the entire financial system.
The Obama administration's plan for reining in derivatives leaves unchecked one of Wall Street's dirty little secrets: the ability of a derivatives dealer to redeploy cash collateral that gets posted by one of its trading partners.
That's the message from the government's reluctance to swoop in and bail out one of the nation's biggest commercial lenders, CIT Group Inc, as it struggles to stay afloat. But even though CIT doesn't have the firepower to take down the global financial system, its failure would certainly be felt by some of the struggling small businesses that rely on its financing.