Reactions to the Fed's plan to lend directly to businesses. Plus: Rachel Maddow interviews Paul Krugman.
Felix Salmon is “not convinced” that it “is necessarily a great idea.”
“I just wish that the policy response to this crisis was a bit more strategic and coordinated, rather than looking ever more confused, ad hoc, and panicked.”
Dean Baker recalls that last week, Hank Paulson told Congress that “there was no Plan B.” Except, apparently, there is.
They wouldn’t do it unless they had to. And if they had to do it, that they are doing it is very good news indeed.
But let’s give economist Nouriel Roubini, whose track record predicting the crisis looks better every single day, the last word, for now. Roubini spent last week savaging the Paulson plan as insufficient to the task, and called for a much more radical approach to addressing the credit freeze. Turns out, getting the Fed involved in the short-term lending market was one of his key proposals.
This action follows closely one of the radical policy options that I recommended last week: “Direct lending to the business sector from the Fed … to the non financial corporate sector. This could include Fed purchases of commercial paper from corporations and other forms of financing of the short term liabilities of the Administration to small businesses secured in appropriate ways. Given the collapse of the corporate [commercial paper] market and the banking system reluctance to provide loans to the corporate sector (credits lines are being shut down) the only alternative to the Fed becoming directly the biggest emergency bank for the corporate sector would be to force the banking system to maintain its exposure to the corporate sector, possibly in exchange for further Fed provision of liquidity to the banking system. The former option may be better than the latter to deal with the looming illiquidity of the corporate sector.”
I don’t know exactly what kind of portent is conveyed by the Federal Reserve’s decision to start following Nouriel Roubini’s policy prescriptions, but I sure wouldn’t have imagined it likely a year or so ago.
And in a slightly related note, I managed to catch Rachel Maddow interviewing Paul Krugman on her new MSNBC show last night. She asked some good questions, and got some good answers from Krugman, who is pretty clearly rattled by the state of the economy. The final analysis from Krugman: Eventually there will have to be some form of partial, likely temporary, nationalization of the financial system. He spoke before news of the Fed’s commercial paper gambit broke, but I think he would agree that this is just one more step toward that final resolution.
UPDATE: Felix Salmon, who once blogged under the auspices of Nouriel Roubini’s RGE Monitor, but who has been consistently critical of his extreme doom prognostications over the past two years, fulfills the true blogger’s credo today, and admits that Roubini was right.
“Nouriel was right, and I was wrong. The more apocalyptic you were, the more correct you were. And there were precious few people as apocalyptic as Nouriel.”
More Related Stories
- Developers evict historic women's shelter to build luxury hotel
- Guantánamo prisoner on hunger strike cries for help on Twitter
- 3 possible solutions to international tax avoidance
- “I just want the U.S. to send my father home”
- Army weapons engineer tied to white nationalist organizations
- Ted Cruz against the world
- David Vitter's hypocritical, punitive, horrible new amendment
- Louie Gohmert: Women should be forced to carry nonviable pregnancies to term
- Could hackers destroy the U.S. power grid?
- Democrats may be even worse than Republicans at regulating Wall Street
- Eric Holder versus journalism
- A progressive defense of drones
- There's no substitute for government disaster relief
- Holder signed off on search warrant for reporter
- Mississippi could begin prosecuting women for miscarriages
- Mike Judge: "Bowling for Columbine" made me pro-gun
- Closing Gitmo is not enough
- Murkowski: Palin too disengaged to run for Senate
- In IRS scandal, new GOP tactic is ignorance
- Code Pink activist berates Obama at national security speech
- Cuomo: "Shame on us" if New York City elects Weiner
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11