Monday, September 29, 2008
...And Good Morning To You, Too!
The Little Mary Sunshines at AP via ABC are running with this happy news for the Economy0 comments
The "money" quotes (you'll excuse the pun):It usually takes years to recover from a financial crisis severe enough for politicians to ride to the rescue with truckloads of taxpayer money.
Take, for example, the U.S. government's August 1989 bailout of the savings-and-loan industry. The stock market fell by 12 percent within the first 14 months of the rescue plan while the economy slipped into an eight-month recession that began in July 1990. Housing prices that had just begun to erode continued to fall for another three years.
There's little reason to believe it will be dramatically different this time around, particularly since this bailout involves harder-to-value assets and comes with the U.S. economy already on the edge of a recession, if one hasn't begun already.
They're such kidders at AP.
Or this:If the ratio of losses to assets inherited in the latest $700 billion bailout is similar to what occurred in the S&L crisis, the taxpayers will be saddled with a bill of more than $250 billion, which also translates into about 2 percent of the nation's current GDP.
Data from the IMF's study suggest the losses could run even higher. The monetary fund calculated governments typically recover about 18 cents on every dollar spent in bailouts—a rate that would translate into a loss of more than $500 billion. The United States seems unlikely to sustain a loss that large since it presumably will be buying the banking assets at a sharp discount—leaving plenty of room for an upside.
Well, THAT'S certainly consoling.
And the real John McCain angle in all this?
Yes, we know about Hero John being a professional POW and all of that, and how he got his hand caught in the cookie jar in the Keating 5 scandal, but we tend to forget the impact that John's little sojourn into creative accounting meets political influence had—much further ripples and greater impact on all of us across the country. Remember, McCain helped CAUSE that bailout. Remember, also, that THAT was a massive bailout, too. And here's what it did to us:Although warning signs of an industry breakdown started to flash in the mid-1980s, the government waited until August 1989 to create the Resolution Trust Corp. to dispose of the repossessed homes, offices, cars, planes and even artwork held by failed S&Ls.
During the next six years, the RTC sold nearly $400 billion in assets on the books of more than 700 failed thrifts. Taxpayers ended up sustaining a loss of $125 billion to $150 billion on the fire sale — about 2 percent of the country's gross domestic product by the time the bailout was completed in 1995. Entering the S&L bailout, the government had projected a taxpayer loss of $40 billion to $50 billion.
It's kind of like putting a notorious hacker in charge of your IT security. Could work, or he could cave in to old impulses.
posted by Gotham 8:25 AM
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