Monday, February 2, 2009

Obama Says U.S. Banks Will Have to Write Down Assets



Feb. 2 (Bloomberg) -- President Barack Obama said the U.S. is suffering from a “massive hangover” from years of economic risk-taking and that some banks remain “very vulnerable.”

The extent to which no one understands the problem is astonishing. The president's comments are very frustrating in that he, and his economic team, fail to recognize that banks are hurting because of a weak economy and concomittant lack of demand.

The problem is not that the U.S. is suffering a "massive hangover." The problem is that fiscal drag in 2006 and 2007 triggered off an economic downturn that has been at the heart of the bank problems ever since. Fix the economy via sufficient gov't spending and/or tax cut stimulus and you fix the banks.

Writing down assets is destructive. Forcing the banks to write them down and then injecting capital and wiping out shareholders is outrageously destructive and makes no sense whatsoever.

Policy is utterly confused at this point in time, suggesting that pain will linger until automatic stabilizers support the economy at some level.

4 comments:

googleheim said...

If everyone runs out of the markets, gets wiped out as shareholders to downwritten toxic waste, buys gold, and there is no spending & tax cuts then in effect we are indirectly or directly a pegged currency to China & on a gold standard while the FDIC would take around 3 months to get in gear and in the mean time .....

Why not restart the SuperConductorSuperCollider, a bullet train from NY to LA, new bridges, wind towers from sea to shining sea, etc etc

googleheim said...

If Obama said "hangover", that sounds like a direct take from Bush's very same remark.

Tax payers had to shell out a quarter of billion dollars just for the inaugral party and procession ???

Obama needs to respect the Republicans and repudiate their hesistancy - the Re-puke-klans will only respect Obama once he starts throwing some fast hard pitches.

Maybe Obama can get lessons in baseball.

Mike Norman said...

Why not just suspend the payroll tax and give $300 billion to states. Oh yeah, one more thing: Fed should target stock prices.

Elbows will suffice. It works in basketball; a game he plays.

googleheim said...

How about a little Phi Slamma Obama - taken from the frenetic style of Phi Slamma Jamma with Drexler, Olajawon, and company.

Total fast break and full court lobbs on spending and tax cuts.

If that is, this is really an emergency.