Give Brown and Darling Some Credit


by Shariq
26th November, 2008 at 4:17 pm    

It may turn out that their decisions were wrong. However the moves to recapitalise the banks were backed by most economists, finance people and business journalists as a sound measure to try and restore confidence in the markets and prevent an economic catastrophe.

On the other hand the deal which Hank Paulson has given to bail out Citigroup has been universally condemned as being too generous and not safeguarding taxpayers interests. Via Kevin Drum, here is a summary of what economists have said about the deal.

Do check it out. It seems staggering that this is being allowed to happen. Unfortunately Obama is sticking firmly to his ‘one president at a time’ mantra because he doesn’t want to be associated with what Paulson does. I guess that’s fair enough but it would be nice if someone tried to stop this happening.

Sunny updates: I can’t wait for the right-wing libertarian trolls to exclaim somewhere that Citibank should be allowed to fail or that this isn’t symptomatic of most financial companies badly failing obligations to shareholders.


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  1. Rob Atkins — on 26th November, 2008 at 4:58 pm  

    They’ve been given too much credit; they’ve allowed too much credit to be available; it’s entirely to their DIScredit that the country’s in the mess it is …

  2. Sunny — on 26th November, 2008 at 5:52 pm  

    Agree Shariq, but some are going to whine regardless.

  3. Refresh — on 26th November, 2008 at 6:08 pm  

    Give them credit as placeholders for the last vestiges of thatcherism; then dump them for real labour.

    I want to hear pips squeek, and their nuts ping!

    Sunny, I’d like citibank to fail. I’d also like depositors’ legal rights to be placed above those of their shareholders.

  4. Jai — on 26th November, 2008 at 6:22 pm  

    Sunny, I’d like citibank to fail. I’d also like depositors’ legal rights to be placed above those of their shareholders.

    Not a good idea. After what happened when Lehmans was “allowed to fail”, something similar happening to Citigroup would have wreaked even more havoc on the global financial markets and the economy. These things don’t just affect the investment banking sector (especially when a titan like Citigroup is involved), as everyone else is currently finding out.

    Anyway, the alternative scenario to getting bailed out would have involved Citigroup being taken over by another financial services firm and possibly broken up. It wouldn’t have been allowed to collapse completely.

  5. Refresh — on 26th November, 2008 at 6:35 pm  

    So they really do have us all cornered?

    It would still be nice to see the CitiCrew flayed alive, whilst being drizzled with boiling oil.

    The agony would last longer that way than being dropped in a vat of the stuff.

  6. Sunny — on 26th November, 2008 at 8:26 pm  

    Erm, Citi has 2 trillion dollars worth of assets. That’s more than the British GDP. If it fails everyone goes down with it.

  7. Rumbold — on 26th November, 2008 at 8:30 pm  

    Refresh:

    Obviously you must be a “right-wing libertarian troll”, as obviously the taxpayers should ensure that the bankers can keep their gilded lifestyles.

    Bail them out, then shoot them.

  8. Refresh — on 26th November, 2008 at 8:41 pm  

    ‘Bail them out, then shoot them.’

    Its in the public’s interest.

    I don’t know if you recall how the right wing media used to sneer at China and Soviet Union for holding the notion of ‘economic crimes’ – perhaps now we know what it really means.

    The best tonic for me is to view bankers as spiders who weave webs, always to their advantage; except uniquely we have the chance to be the cruel child that gets to pull the spider’s legs off one at a time.

  9. Refresh — on 26th November, 2008 at 8:42 pm  

    ‘Erm, Citi has 2 trillion dollars worth of assets.’

    How so? Perhaps in some auditor’s dream.

  10. Rumbold — on 26th November, 2008 at 8:43 pm  

    China could deal with them.

  11. Imran Khan — on 26th November, 2008 at 8:45 pm  

    Couldn’t Lehmans sue because the Fed chose to bail out Citi and others but not Lehmans?

  12. Refresh — on 26th November, 2008 at 8:48 pm  

    ‘China could deal with them.’

    Yes – lets send them to China! We can use the oil saved, to keep the lamps lit.

  13. Bert rand Rustle — on 26th November, 2008 at 9:45 pm  

    http://www.nakedcapitalism.com/2008/11/gentrifying-gitmo.html gives our darling Brown rather less credit.

  14. Jai — on 27th November, 2008 at 11:51 am  

    Refresh,

    So they really do have us all cornered?

    Yep.

    Its in the public’s interest.

    Afraid not, old bean. I agree that specific incompetent bankers should pay the price, but the continuing fallout from Citigroup (or another one of the really big players) disintigrating would be catastropic for everyone.

    It affects everything — the FTSE and other global indices, the ability/willingness of banks to lend to each other and to companies in other sectors, the procurement of services between organisations in different sectors, recruitment and employment right across the board (with exceptions such as medicine etc), and so on.

    How so? Perhaps in some auditor’s dream.

    No mate, the larger financial services firms really do have trillions of dollars of assets. For example, go to JPMorgan’s website and read their profile if you don’t believe me.

  15. Refresh — on 27th November, 2008 at 12:14 pm  

    Jai, I don’t really doubt that as an investment bank they control those levels of assets. What I should say is that if they do go under, the individual companies they control themselves would be released and the governments should be looking to keep them going – independent of Citibank or whatever.

    I presume the problem for the individual companies is that they may be struggling with getting loans and credit.

    And for the future we should ensure no corporation is ever allowed to get so big that they can take down a whole civilisation or have such powerful sway over elected governments.

  16. Refresh — on 27th November, 2008 at 12:28 pm  

    And I guess the specific point about valuation (the trillions) is that they are worth what people were prepared to pay for them. Today it would seem not a great deal. That is the speculative nature of sharedealing and stock markets.

    The underlying businesses themselves could well be pretty stable, and worth buying. I think Warren Buffet has been buying up shares at these knock down prices, and if I understood his philiosophy, he invests in businesses which are run by people who have a direct and personal stake (eg family run) rather than the crony network of execs, non-execs etc. That said, he too should be limited in what he can own and control.

  17. Little Richardjohn — on 1st December, 2008 at 1:01 pm  

    The bankers are on strike. Simple as that.
    In a time of war, this would be intolerable from any essential wokers.
    Are we at war? It feels like it, even without the sirens.

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