John Berry: "You Can't Govern Out of Anger"
Yes, you can. But it's not likely to go well.
John Berry of Bloomberg:
Some politicians and prominent economists and analysts want the government to stop fooling around with schemes to prop up ailing banks and just take them over. Then what? Then the government would have to run these immense, international banks.... Such an effort would take place in a climate of public distrust of anyone associated with large financial institutions -- and an equal level of distrust of the government on the part of employees of banks. That’s a prescription for a debacle....
Instead of nationalization, the Obama administration, with the Federal Reserve’s backing, must help the banks repair their balance sheets. The $1 trillion Treasury program announced yesterday has a good shot at doing that....
The politicians have to just lay off AIG. The economy isn’t going to have a solid recovery from this recession until financial markets are functioning normally again. And that’s not going to happen until banks are able and willing to extend credit once more. A first step is for the Senate to reject the punitive and legally dubious AIG-inspired bonus tax approved by the House.... As I’ve said before, it’s probable that many of the questionable assets can be profitable for long-term investors because they are backed by home mortgages that still are for the most part performing rather than in default....
There’s not enough uncommitted TARP money to provide all the equity support that’s needed. The Federal Reserve is providing an enormous amount of leverage through its balance sheet. However, at some point Congress is going to be asked to provide more TARP financing, and currently the response would be a very loud, “No!” Paul McCulley, manager of Pacific Investment Management Co.’s Short-Term Fund, said in a March 19 speech that Congress should come up with more TARP money. If it refuses, he said, the Fed would have to keep stepping in to “leverage the darn daylights” out of the TARP dollars. That may well be what it will come to if Congress doesn’t begin to show some political courage...
