When the wheels started to come off the financial markets in September, I contended that swift action was necessary. The Fed, for its part, did well in doing what it could within the bounds of its mission to prevent a complete collapse. But the Fed was running out of options that were feasible for it to do on its own. It was time to bring in the Treasury, and by extension, Congress. I was not overly optimistic, but stood behind the effort. I believed then, as I still do today, that if no legislation had been passed the probability of a further chain reaction in the financial markets during the presidential transition would be greatly elevated. And the consequences of that would be potentially quite severe. A legislative measure brought with it a measure of confidence during that transition.
$700 billion is a lot of money. It's too much to risk letting go to waste, and still not enough to cover all of the potential losses out there. Given the problems encountered so far, I believe it is prudent to slow things down. We need triage. Put the remaining TARP money where it will do the most good at preventing counterparty failures rather than frittering it all away on things of questionable value and purpose.
Yeah, right. That's easier said than done now. But no matter--buckle down and do the hard job. Continue to let the market unwind. The TED spread is way down from October, which is one sign that things are working themselves out. There will be some more pain on Wall Street. Accept that as inevitable, and do not prolong the inevitable. Walking the fine line between preventing counterparty failures and not prolonging the inevitable pain is Mr. Geithner's job. I think he's well equipped to walk that line, but the jury will be out for some time.
Now comes the fiscal stimulus. This post is already getting long, so let's address that in part 2.
$700 billion is a lot of money. It's too much to risk letting go to waste, and still not enough to cover all of the potential losses out there. Given the problems encountered so far, I believe it is prudent to slow things down. We need triage. Put the remaining TARP money where it will do the most good at preventing counterparty failures rather than frittering it all away on things of questionable value and purpose.
Yeah, right. That's easier said than done now. But no matter--buckle down and do the hard job. Continue to let the market unwind. The TED spread is way down from October, which is one sign that things are working themselves out. There will be some more pain on Wall Street. Accept that as inevitable, and do not prolong the inevitable. Walking the fine line between preventing counterparty failures and not prolonging the inevitable pain is Mr. Geithner's job. I think he's well equipped to walk that line, but the jury will be out for some time.
Now comes the fiscal stimulus. This post is already getting long, so let's address that in part 2.
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