Wikinvest Wire

A good question (for another day)

Wednesday, September 17, 2008

In this Wall Street Journal op-ed , Holman Jenkins asks a question that would probably be better asked on a different day, but he happened to ask it today, "Is the U.S. government running out of money to rescue banks (and insurers)?"

Here's a discomfiting thought: All along, one assumption has animated the Fannie and Freddie bailout: If their debt is seen as Treasury debt, all will be well with their mortgage funding.

What if the assumption is wrong? What if the world's investors, seeing the federal government willy nilly expanding its commitments in all directions, begins to lose appetite for Treasury debt itself?

That thought likely lay behind Ben Bernanke and Henry Paulson's hesitation to aid AIG, though finally the Fed seemed ready to cough up in a truly big way last night. Even those who closely follow the credit crisis probably expected to see banks and savings institutions heavily laden with mortgage debt end up on the triage pile -- not an insurance company known for its pioneering work in China, its giant aircraft leasing business, and the like.
Fed intervention seemed a no-brainer, given the assumptions and priorities that have driven such decisions in the past. But it's hard to escape the suspicion that, despite hearty talk of limiting "moral hazard" and a late-developing urge to "stand on principle," any dithering really came because the Fed is worried about running out of money, fearing even more gargantuan calls on its resources down the road.
The Fed running out of money? That's ridiculous.

The Chinese wavering in their commitment to the dollar? That's ridiculous too.

This just in ... a related story from Reuters:
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Anonymous said...

Maria Bartiromo on CNBC: "I just got off the phone with one of the big trading desks and one of the guys there told me they are actually seeing some BIG hedge funds come in on the buy side."

I think it's going to get much better from here on out.

Thanks Maria :)

Tim said...

I saw that. It's like CNBC is single-handedly trying to prop up the stock market (and not doing very well lately).

Anonymous said...

These are the same clowns that thought all those NASDAQ stocks were great buys back in 1999, right? I don't watch CNBS, but I like funny stories about em. Maria? Not a fan.

DaveK said...

Maybe Maria thinks she can single-handedly (via CNBS broadcast excellence) restore confidence. After all, google just about destroyed UA with a story no one bothered to read the date on.

Anonymous said...

Thanks to Fed actions, most of the world would now have to equate Tbills with the toxic waste they have been swapped for. Pretty simple comparison really.
So AIG did pioneering work in China.
That would be the same China that has experienced two bad earthquakes and at least one major flood so far this year.

me said...

"Thanks to Fed actions, most of the world would now have to equate Tbills with the toxic waste they have been swapped for."

I like that, pretty funny but sad.

I have been saying we are out of money and now look at last month's TIC data and lo and behold, we are running out of money.

How long before the IMF comes in and tells the US cut spending, raise taxes and we will lend you some money?

dearieme said...

OK, gold or cowrie shells?

Anonymous said...

Print! Print! Print!

Come on, Ben.

You know you wanna.

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