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Tuesday, March 24, 2009

Great Recession Roundup — March 24, 2009

Items of Interest:

The Great Toxic Asset Giveaway

Jackie Calmes / New York Times:
Rescue Plan, With Some Fine Print, Dazzles Wall Street -- This time President Obama directed some of the stagecraft. This time Treasury Secretary Timothy F. Geithner fleshed out the substance of their long-anticipated program to remove banks’ toxic assets and revive the financial system. And this time the reaction was widely positive, giving the embattled Mr. Geithner a critically needed boost...

Tom Petruno / Money & Co.:
Wall Street Stands To Get Much Richer -- Wall Street stands to get richer off the latest installment of the financial-system rescue. But this time, some individual investors might be offered a piece of the action.

Two of the country’s biggest money managers -- Pimco (Pacific Investment Management Co.) and BlackRock Inc. -- say they may launch funds that would allow individuals to have a stake in some of the bad assets to be purchased from banks...
Mr. Practical / Minyanville:
What a Deal -- Public Private Investment Partnership (PPIP) will do nothing to stop loss of real wealth...

The government's plan, through carry trades, bailouts, and plans within plans, is to buy time by slowly bilk the taxpayer and hand the money over to banks, banks that don't deserve to have their equity worth anything. Bulls are talking about how much free cash reserves banks have, but two things are offsetting that: continued write-down of assets and rising margin requirements. The first is still a black hole the second we can only hope that regulators are serious about "not letting this happen again": it was their continued lowering of margin requirements and looking in the other direction of shadow banking that allowed this situation to happen.

Which brings me to my final point. We hear over and over again how government bailouts always make back the money. Wait long enough and the economy will grow so that the assets can be sold at a higher price. But remember what we have learned about price and the value of the dollar: prices go up when the dollar goes down. So although bailouts like the savings and loan crisis may have earned back all the "nominal" dollars it spent, it received dollars to settle the debts that were worth much less. The value of the dollar has eroded by 95% since 1930. In other words, real wealth was lost...
Bucking the Busted Buck?

Jamil Anderlini / Financial Times:
China calls for new reserve currency — China's central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund. — In an essay posted on the People's Bank of China's website, Zhou Xiaochuan …
John Pomfret / Washington Post:
The End of Dollar Dominance? -- Are the Chinese just worried about the sagging value of the $1.4 trillion in U.S. Treasuries they hold or are they really on to something? ...

James Joyner / The Atlanticist: China: We Need New World Currency
Justin Gardner / Donklephant: China Pitches New Reserve Currency
Mikkel Fishman / The Moderate Voice: Two Posts That Reveal The Long View
Joe Weisenthal / Clusterstock: China Wants A New Reserve Currency
Yves Smith / naked capitalism: China Calls for New Reserve Currency
Larry Doyle / NO QUARTER: China Ups the Ante
Doug Mataconis / Below The Beltway: Is China About To Torpedo The Dollar ?
Blake Hounshell / FP Passport: Is China dumping the dollar?
Who will have the power to seize?

Washington Post:
U.S. Seeks Expanded Power to Seize Firms — Goal Is to Limit Risk to Broader Economy — The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers …
Kevin Drum / MoJo Blog Posts: Another Mile Down the Road
Chris Utah / Nosh at Culture11.com:
Street Fighting Bas Rutten Style -- These moves are handy and can be applied to unruly bar patrons (or unwilling investors)

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia