Matt Yglesias

The Bush/Paulson Record

Brad DeLong posted this chart of the TED spread. I annotated it:

This is why the right response to a Bush/Paulson decision that we have to “do something” would probably be to take their specific proposal, light it on fire, and then call up some people who hadn’t spent the past 12 months ignoring festering problems and ask them to help you write a proposal.

21 Responses to “The Bush/Paulson Record”

1. Sam Says:
   September 24th, 2008 at 9:18 am

   Isn’t the Ted Spread the ratio of three month T-bills and the LIBOR?

2. right Says:
   September 24th, 2008 at 9:29 am

   Are you not aware of the many things that Bush, Bernanke and Paulson have been doing for the last year to try to avert the point where we need a massive government bail out?

   Let’s see… cutting interest rates, economic stimulus, term lending facility for investment banks, backstopping the Bear Stearns deal to forestall market panic, slow-motion renationalization of Frannie and Freddie, AIG bridge loan, frantic attempts to find a buyer for Lehman and Merrill…

   The problem, which was not easily foreseen a year ago, was that none of those actions turned out to be sufficient. And why do I have a feeling that expert-on-everything Matt Yglesias would have thought a $700B bailout proposed last fall would have been a teensy bit loonier than he does right now?

3. Chris Says:
   September 24th, 2008 at 10:10 am

   I thought this was the TED spread:
   http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
   The difference between the 3mo. T-Bill and the LIBOR (London Inter Bank Offered Rate, the rate that banks lend to each other). They look very similar, but this version doest go past 3.13%

4. nukev Says:
   September 24th, 2008 at 11:53 am

   Likewise, anybody (congress included) could see that the “sub-prime” disaster was coming and that double digit increases in housing prices were creating a bubble. Lots of people were culpable. None of it changes the fact that “something” needs to be done. I have no doubt the farce of a plan presented by Paulson will be scrapped. It seems to me that the sheer audacity of it was waving a red flag to get attention to a very serious situation. Hopefully, congressional Dem’s put together a “good” plan.

5. Cliff Mason Says:
   September 24th, 2008 at 4:00 pm

   Call me self interested, but does anyone remember back in August of 2007 when Jim Cramer exploded on Erin Burnett’s show, screaming about how bad the fixed-income markets were, how the Fed knew nothing, and how interest rates needed to be slashed dramatically and quickly to allow banks to recapitalize through higher net interest margins and avoid the current crisis?

   Nobody?

   Greenspan took rates down to 1% in 2003, things were better then than they are now and the fed funds rate is at 2%. It was at 5.25% in August of 2007, I believe, and if Bernanke, who was scared of inflation (hey, look at how commodity prices have collapsed lately leading to DEflation, not to mention the fact that falling house prices were deflationary, and energy and food inflation were always beyond the Fed’s control), had cut rates that aggressively last August there would be no need for a bailout.

   But when Cramer ranted everybody acted like he was insane and deferred to Bernanke, who’s been clueless and behind the curve the whole way, because… I don’t know.

6. Kolohe Says:
   September 24th, 2008 at 4:23 pm

   As I’ve said before, it’s great that your finally paying attention to this now, but it’s obvious you haven’t been before the last two weeks.

   First, look at that chart again. Note that right after your annotation the spread does go back down; not quite to historic baseline, but nonetheless on a overall downward trend. So, anyone who would be using this measure exclusively would think that the stuff they did in the spring was in fact working. (and until the cascade of Franie/Lehman it looked like it just might of worked)

   More importantly, who could possibly be surprised that the Bush adminisration would do nothing until a crisis was close to the breaking point – and then much things up. This has been the modus operandi for the entire time. Congress changed hands because the voters (myself included) were disastisfied with the direction of leadership or the absence thereof in the administration. But since then, why kind of leadership has Congress shown? Really, after 20 months, though, what the frack have they done? Why weren’t these committee hearings performed at your first annotation? Why did they instead, do some stupid jawbowning of the CEO’s of Merryll and countrywide whining that they made too much, and some equally useless ones with Oil CEO’s?

7. Kolohe Says:
   September 24th, 2008 at 4:23 pm

   “then muck things up”

   (would it really be so techinically diffifult to have a preview function?)

8. Obvious Says:
   September 24th, 2008 at 5:50 pm

   Why not just take all that money they’re considering using, and pay off the mortgages? The lending institutions get their money and citizens get back a huge chunk of their income to spend elsewhere – talk about economic stimulus.

9. Cliff Mason Says:
   September 25th, 2008 at 1:24 am

   Obvious, OK, here’s the math: 14 million people took out mortgages to buy homes between 2005 and 2007–these are the bad mortgages that are crushing the banks. That works out to $50,000 a head, and would more than likely solve the mortgage crisis, but it would also be a huge transfer of wealth from people who didn’t buy homes during the bubble to people who did.

   What people miss about the $700 billion plan, not that I like Paulson’s version, but I do believe we need something, is that it’s not a giveaway. We’d be purchasing $700 billion, if we spent all of the money, worth of mortgages essentially. Even if every one of those defaults, and they wouldn’t, we’d be getting a big chunk of real estate. This is not a giveaway.

   Depending on the prices we pay, the government could easily turn a profit, even without the equity stakes Dodd is demanding (something I support), and save the banking system at the same time. Now, you’d have to have real oversight when it comes to prices, but since these mortgage backed assets are marked at 6 cents on the dollar at most firms, because that’s where Merrill dumped its toxic portfolio at a real firesale price, just buying them at 30, 40 or 50 cents on the dollar would be a big mark-up for banks that don’t even sell their mortgage-backs to the government. And if we paid 50 cents on the dollar for everything, we’d probably come out ahead by $200 billion in 2-3 years.

   I hate the way this plan is being sold. I like the Dodd plan, but even he needs to present it better. This is not a giveaway to broke banks, it’s an investment–one that could turn a tidy profit–in the American financial system.

10. viagra Says:
    March 1st, 2009 at 5:54 am

    viagra
    Excellent site. It was pleasant to me.

11. viagra Says:
    March 11th, 2009 at 4:48 am

    Great site. Good info

12. zyban Says:
    March 12th, 2009 at 11:43 pm

    I bookmarked this site. Thank you for good job!

13. xanax Says:
    March 14th, 2009 at 5:31 am

    Very interesting site. Hope it will always be alive!
    xanax

14. tramadol Says:
    March 17th, 2009 at 2:30 am

    Great site. Good info
    tramadol

15. tramadol Says:
    March 22nd, 2009 at 6:19 am

    tramadol
    Great site. Good info

16. brand viagra Says:
    April 2nd, 2009 at 5:25 am

    It is the coolest site,keep so!
    buy cheap viagra

17. viagra brand Says:
    April 3rd, 2009 at 4:17 am

    Incredible site!
    cheap brand pfizer viagra

18. hyob nuobsca Says:
    April 4th, 2009 at 3:04 am

    wdrn qasikvlz faekp xpnbcltvr dgqhta acre ceisyqr

19. Ex Boyfriend Says:
    April 9th, 2009 at 12:13 am

    If you want to hear a reader’s feedback , I rate this article for 4/5. Decent info, but I have to go to that damn yahoo to find the missed pieces. Thanks, anyway!

20. cheap viagra Says:
    April 9th, 2009 at 6:34 am

    I bookmarked this site, Thank you for good job! viagra

21. How to Get Six Pack Fast Says:
    April 15th, 2009 at 10:34 am

    I noticed that this is not the first time at all that you mention this topic. Why have you decided to write about it again?