Nov 24th, 2008 at 6:12 pm
Sorta Working
Ryan Avent offers some evidence that despite the infuriatingly bad implementation and continuing dire situation, the passage of the $700 billion rescue package did in fact help avert a greater disaster:
What you’re seeing post bailout are spreads that exist on the high end of the unusually high levels we saw throughout 2008. But pre-bailout, things were spiking at way, way, way higher levels in a way that could have truly brought the economy to its needs. We need to do better, but to do better we need a better administration.
68 Responses to “Sorta Working”
Register
RSSLogin
Advertisement
Visit Our Affiliated Sites
Books By Matthew Yglesias
Topic CloudView topics sorted by popularity
Abortion
Afghanistan
Basketball
Blanche Lincoln
Budget
Cars
China
climate
Congress
Crime
DC
Demographics
Economics
Economy
Energy
EU
Finance
Football
Gender
Health Care
History
Inequality
Infrastructure
International Relations
Iran
Israel
Media
Monetary Policy
National Security
NBA
Pakistan
Palestine
planning
Political Reform
Public Health
Public Opinion
Race
Regulation
Sarah Palin
Sports
Stimulus
taxes
Technology
Trade
transportation
Featured
Subscribe to the Progress Report
Contact Matthew Yglesias
Use this form to contact blog author Matthew Yglesias.
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
November 24th, 2008 at 6:18 pm
You don’t tell us what the line on the chart represents, and while I like the sound of “bring the economy to its needs,” I don’t think that’s what you meant to write.
November 24th, 2008 at 6:26 pm
It’s also possible that things spiked up as people overreacted. I assume that vertical line represents when the bailout happened? If that’s the case, things were already coming back down.
November 24th, 2008 at 6:30 pm
Ok, Avent’s post doesn’t say what the fuck the chart represents either. I clicked through to Bloomberg and that isn’t any better.
Anyone? Bueller?
November 24th, 2008 at 6:39 pm
The chart is of the TED spread. It took me a few links to verify that. I’m not going to write a big explanation of the TED, you can find it on Wiki. Suffice it to say that if it’s over 1.5, something’s really wrong. It basically means that banks don’t trust each other. And for good reason. Banks are assuming that other banks are holding the same crappy assets they are. They wouldn’t want to loan to themselves, so they don’t want to loan to another bank, either.
November 24th, 2008 at 6:40 pm
Joe, the line is the TED spread. A higher TEDSP indicates greater credit risk in the economy. A few weeks ago, that graph looked like a hockey stick and a lot of people were rather terrified. From ‘01 well into ‘07 it stayed under 1%. As you can see it was recently pushing 5%.
lfv, the vertical lines represent the beginning of months. TARP passed Congress on Oct. 3, and Oct 14 was when the big $250B bank deal was agreed to. The TEDSP peak was on Oct 10 according to the Bloomberg graph, and the huge 6-day drop from 4.3% to 2.5% started on Oct. 15.
November 24th, 2008 at 6:42 pm
You don’t tell us what the line on the chart represents….
Well, any trained analyst would recognize the blue line as the Aggregate Financial Badness Indicator (AFBI), which measures the amount of badness in the financial world. As you can see, badness peaked sometime after July and is now at roughly Jul 2007 levels. The AFBI can also be used to measure the relative activity of private detective John Shaft, ’cause he’s one baaad motherf—.
November 24th, 2008 at 6:51 pm
I knew that was the TED spread when I saw it, which is weird. No one should know what this stuff means. The bad part is that little tick up at the end is going somewhere and it might be right back up.
November 24th, 2008 at 6:54 pm
But pre-bailout, things were spiking at way, way, way higher levels in a way that could have truly brought the economy to its needs.
Yep. Rich people were running around like chickens with their heads cut off.
But thanks to reassurance offered by 700 billion in free cash for rich people, they have all calmed down and are merely as panicked as they have normally been over the last year or so.
The only important lessons are 1) the government is the property of rich people and their servants, 2) the Bush administration would rather destroy the economy than do the right thing, and 3) Congressional Democrats are easily panicked and not very bright, so 4) passing the bailout mattered not because it was the right thing to do, or because it fixed anything, but because our ruling parties are prepared to do so much damage to the system to save their money, that 700 billion didn’t matter all that much one way or the other.
max
['It's all wastepaper either way.']
November 24th, 2008 at 6:58 pm
The quick and dirty explanation of the TED spread is that it’s the difference between the interest rate the U.S. government has to pay to borrow money for 3 months and the interest rate banks have to pay to borrow money for 3 months.
The U.S. government is widely presumed (rightly or wrongly) to have essentially zero risk of defaulting on its debt, so people take the interest rate the U.S. government pays to be a baseline measure of the interest rate environment (i.e. the interest rates dictated by broad economic trends, excluding any particular debtor’s specific credit risk). The TED spread is considered useful in that it isolates the risk of bank failures from those broader economic trends.
So, you could conclude that the TARP program helped to cut the risk of bank failures by about 50% from the worst moment of the crisis, but that risk remains 2 to 5 times higher than normal.
November 24th, 2008 at 6:59 pm
OK, thanks. I know what the TED is, I just didn’t know that’s what this chart was showing us.
November 24th, 2008 at 7:04 pm
# MikeF Says:
November 24th, 2008 at 6:40 pm
Joe, the line is the TED spread. A higher TEDSP indicates greater credit risk in the economy. A few weeks ago, that graph looked like a hockey stick and a lot of people were rather terrified. From ‘01 well into ‘07 it stayed under 1%. As you can see it was recently pushing 5%.
lfv, the vertical lines represent the beginning of months. TARP passed Congress on Oct. 3, and Oct 14 was when the big $250B bank deal was agreed to. The TEDSP peak was on Oct 10 according to the Bloomberg graph, and the huge 6-day drop from 4.3% to 2.5% started on Oct. 15.
Gee thanks, pal. But at least you confirmed what I thought about the vertical line that is not actually labeled.
November 24th, 2008 at 7:05 pm
IT’s not $700 Billion –its $1.5 Trillion. And that’s not counting a shitload of other bailouts –including UNFUNDED guarantees and loans that the Fed is making.
Current estimate is that we have about $7.8 TRILLION on the table in this little soiree. Just in the last 4 months — that’s not counting the roughly $5 Trillion Bush ran up on our credit prior to August of this year.
See http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home
The average citizen is getting screwed badly by this bailout — that’s why the News Media is refusing to look at it closely and reveal who’s gaining and who’s losing.
November 24th, 2008 at 7:10 pm
2) the Bush administration would rather destroy the economy than do the right thing
I don’t know what you would rather have seen done, but what you see represented was a freezing of the credit market. You couldn’t buy commercial paper at one point at any price. What you would have seen is otherwise solvent businesses that rely on the paper market for seasonal or other short-term reasons (that’s all of them) fold over for no apparent reason. Bank runs, no cash in ATM machines, as the whole mess devouring everyone. The rich might have got hurt but it would be nothing compared to what came down on everyone else’s heads.
November 24th, 2008 at 7:11 pm
“No one should know what this stuff means.”
Well, bankers really should know what it means. But if the rest of us are hearing about, that’s a bad sign. I’ve only had to deal with it rarely in my work. It tends to come up when you’re trying to get a bridge loan on venture capital financing. And few of us ever have to deal with that kind of thing. Even then, the TED only really comes up if it’s moving.
November 24th, 2008 at 7:17 pm
lfv, the graph is interactive. It draws a vertical line at your cursor. The line on the screenshot attached is way after the bailout passed Congress. Open the Bloomberg page buddy, you’ll figure it out.
November 24th, 2008 at 7:39 pm
Why doesn’t anyone ask Barack Obama why the fuck he isn’t asking Brooksley Born for advice and appointing her to a senior position?
She is the one who got the derivatives issues RIGHT 10 years ago — and lost the fight to Larry Summers, Robert Rubin, and Alan Greenspan in Bill Clinton’s Administration. See
http://bloomberg.com/apps/news?pid=20601109&sid=aVYf8XDXiSZM&refer=home
Of course, Brooksley lost Mainly because if the Clintons had not sucked billionaires’ dicks every other week or so they would never have gotten out of Arkansas. Guess how Wild Bill pulled out ahead of the other contenders in the 1992 Democratic primary –in spite of not being able to keep his pants zipped?
November 24th, 2008 at 7:39 pm
this is a really poor blog post. We need better. Perhaps the new administration will bring us the better blog post we needs.
November 24th, 2008 at 7:45 pm
The only important lessons are 1) the government is the property of rich people and their servants, 2) the Bush administration would rather destroy the economy than do the right thing, and 3) Congressional Democrats are easily panicked and not very bright, so 4) passing the bailout mattered not because it was the right thing to do, or because it fixed anything, but because our ruling parties are prepared to do so much damage to the system to save their money, that 700 billion didn’t matter all that much one way or the other.
Bingo.
Why doesn’t anyone ask Barack Obama why the fuck he isn’t asking Brooksley Born for advice and appointing her to a senior position?
She is the one who got the derivatives issues RIGHT 10 years ago — and lost the fight to Larry Summers, Robert Rubin, and Alan Greenspan in Bill Clinton’s Administration. See
http://bloomberg.com/apps/news?pid=20601109&sid=aVYf8XDXiSZM&refer=home
Of course, Brooksley lost Mainly because if the Clintons had not sucked billionaires’ dicks every other week or so they would never have gotten out of Arkansas. Guess how Wild Bill pulled out ahead of the other contenders in the 1992 Democratic primary –in spite of not being able to keep his pants zipped?
How the hell did you think a law professor got out of the South Side?
November 24th, 2008 at 7:57 pm
Misadventures with Spellcheck
“…way higher levels in a way that could have truly brought the economy to its needs.”
I’m sure that you and I really needs our knees, but not clear that the economy needs any knees. At any rate, “bringing the economy to its needs”, actually sounds like a good thing, if a little confusing. But in the context, something not good seems to have been meant. Or maybe “seams to have been meant”, just to keep with the spirit of this post.
November 24th, 2008 at 8:48 pm
I’m glad I’m not the only guy slagging Matt for posting a graph with no title or an unlabeled y-axis; it really betrays his liberal arts background.
November 24th, 2008 at 9:22 pm
I have absolutely no idea what this graph represents other than “spreads.”
Which spreads?
Mayonnaise?
Strawberry Jam?
November 24th, 2008 at 9:22 pm
Vertical axis! Vertical axis!
Skim some 100 bucks off of that trust fund and buy everything by Mr. E. Tufte, stat.
(By the way, parsing Matt’s post, he does suggest that the vertical axis represents “things”. Read carefully)
November 24th, 2008 at 9:41 pm
On some blogs, the blogger asks for donations for a new laptop. Maybe we should all chip in and get Matt an editor.
November 24th, 2008 at 9:41 pm
Wow even for a Lord Yglesias post this is bad. He could at least pretend he knows what he is talking about by noting the y axis. If it was a well constructed blog post (written by someone who actually knew something) we would be able to tell the two axis even without labels. If it was a great blog post it would do that and have labels, instead its more Lord Yglesias filth.
November 24th, 2008 at 9:42 pm
Meanwhile, Naseem Taleb, who appears to know something about probability and chance, is even more worried:
“Cheer up – things could be worse. So I cheered up – and sure enough, things got worse.”
Black Swan author says present economy worse than Depression
http://www.boingboing.net/2008/11/24/black-swan-author-sa.html
Nassim Nicholas Taleb Angry
http://uk.youtube.com/watch?v=ABXPICWjFIo
November 24th, 2008 at 9:56 pm
You spelled “knees” wrong.
November 24th, 2008 at 10:06 pm
Seeing as how people will be defaulting on their credit cards payments at record levels very soon, mebbe the banks are hoarding cash for the next tsunami?
Everybody’s credit is pretty much crap now, anyway. At least among the hoi polloi. No job security- no good interest rates.
November 24th, 2008 at 10:41 pm
mebbe the banks are hoarding cash for the next tsunami?
If that’s really what’s up Obama winds up being a footnote in history before everyone get’s sick of warming their hands over trash cans loots the rich bastards. That would really be step #2 in that scenario.
November 24th, 2008 at 10:55 pm
Re Greg’s comment “How the hell did you think a law professor got out of the South Side?”
———-
I am beginning to suspect that $500 MILLION war chest was not made up entirely of $25 checks from the proletariat.
This just in:
“Obama’s tax hike for the rich may be delayed”
http://news.yahoo.com/s/ap/20081125/ap_on_go_pr_wh/fact_check_obama_taxes
But..but..but…
Sigh.
Petey was right –the Trustfund Scumbags fucked us again.
November 24th, 2008 at 11:04 pm
But thanks to reassurance offered by 700 billion in free cash for rich people, they have all calmed down and are merely as panicked as they have normally been over the last year or so.
Max really needs to restart his own blog!
Poor Matt won’t speak a word crosswise lest he lose his lifelong-dream of becoming a junior speechwriter to Obama’s presumed Asst. Sec of State for International Security, Michael O’Hanlon…
November 24th, 2008 at 11:10 pm
The Latest Vision Thing:
“I don’t know what the number is going to be, but it’s going to be a big number,” Obama economic adviser Austan Goolsbee said. “It has to be. The point is to, kind of, get people back on track and startle the thing into submission.”
———–
I be dammed. Obama managed to find an advisor who talks like Matthew and Alan Greenspan.
November 24th, 2008 at 11:57 pm
Re DTM’s comment “Because that is what Goolsbee was talking about.”
———–
Really?
I need help because I’m tending to get Obama’s economic stimulus plan and George Bush’s economic stimulus plan confused.
In 2001, George W took $2 Trillion from us (from our Social Security accounts, actually.) George then gave the $2 Trillion to the Rich to invest in China , and ,in return, gave the common citizen a $600 tax refund to make up for the $20,000 of debt he dumped on us.
Currently, the plan seems to be to take $7.8 Trillion from us, give it to the Rich to invest in China, and give the common citizen a more generous $650 tax refund to make up for the $78,000 of debt being dumped on us.
November 25th, 2008 at 12:11 am
In reverse chronological order:
Are you opposed to Obama’s proposal for a large economic stimulus package that will focus on jobs, lower- and middle-class tax cuts, infrastructure, education, and “green” programs? Because that is what Goolsbee was talking about.
DTM, take this in conjunction with Don’s post about how the Bush tax cuts for the rich are not going to be reversed “for the foreseeable future.” This means, of course, that any stimulus will be the result of deficit spending – they may even throw some regressive taxes in.
Well, I don’t know about you, but I’m deeply apprehensive about throwing yet more piles of money onto our debt. Particularly since this debt, UNLIKE JAPAN’S OR EUROPE’S, is held by foreigners. The former countries get money from their own citizens.
I am beginning to suspect that $500 MILLION war chest was not made up entirely of $25 checks from the proletariat.
This just in:
“Obama’s tax hike for the rich may be delayed”
http://news.yahoo.com/s/ap/20081125/ap_on_go_pr_wh/fact_check_obama_taxes
But..but..but…
Sigh.
Petey was right –the Trustfund Scumbags fucked us again.
First off, Petey was only partly right. Edwards and Hillary would have picked the same people, in my opinion.
What attracted me about Barack was that his economic advisor was Paul Volcker. Now, Volcker’s measures in the 1980s were painful for a lot of working class people. But they were the only way to beat inflation.
Unfortunately, Volcker was forced out after his second term, and Reagan was prevailed upon to appoint Alan Greenspan. This was, frankly, the real problem. Greenspan’s policies in the 90s and 00s essentially reversed everything Volcker had painstakingly restored.
The Big Fella was, along with others like Anthony Solomon, the president of the NY Fed, an old school Democrat of the FDR school. He participated in the endings of the New Deal in his youth, and the Great Society in his manhood.
Remember, this is a very tired old man who saw and publicly expressed his deep troubles over the housing bubble and the activities of the financial sector in 2005. And he was ignored. A lot of people said he was probably losing it.
But now, what we have seen, is that Volcker was only window dressing.
Barack’s going to be in thrall to the plutocracy just like everyone else. In hindsight, we could have seen it coming. He is, indisputably, a cadet branch of the Daley machine. He owes the Pritzker family and Buffett and a lot of billionaires – not to mention GS, MS, JPM, C, and others – for his cash.
At the same time, we couldn’t have picked McCain. Because as bad as Barack will be, he won’t be as bad as McCain.
That, in reality, is the choice we always seem to be given: either bad or worse. Then, when we pick bad, we descend into this orgy of self-congratulation that obscures the fact that we still made a bad choice.
Frankly, as long as Barack doesn’t hit that big red button, he’ll be a better president than McCain.
And if he does, well, as Keynes said, in the long run we’re all dead, and so only the cockroaches and the lichens will be able to debate whether he was a successful president.
November 25th, 2008 at 12:12 am
Disregard the first part, because Don clarified he meant what I thought he meant.
November 25th, 2008 at 12:27 am
Second, increased deficits in the short term may be the only way to prevent another Great Depression. That isn’t a great set of choices, but I will take increased deficits.
The Depression’s already here.
Btw, since I’m at least partly Keynesian (since, let’s be honest, the Austrians are nuts), let me say I’m not entirely averse to deficit spending. It’s that FDR didn’t just deficit spend, he jacked up taxes on the rich.
Which Barack won’t do. And therein lies our problem. We need to claw back the money paid out to those bastards. We also need to send some of them to jail.
November 25th, 2008 at 1:25 am
Oh. My. God.
ERIC HOLDER for Attorney General???
The DOJ deputy attorney general whose recommendation to Bill Clinton re the Marc Rich pardon was “neutral leaning towards favorable”??
I think I’m going to throw up.
November 25th, 2008 at 1:30 am
If Eric Holder is AG, I would guess that we can bid farewell to any prosecutions of Wall Street for this financial disaster.
Anyone reco’ing a pardon for Marc Rich isn’t going to be bothered by the collapse of a $7.8 Trillion Three Card Monte game.
November 25th, 2008 at 7:44 am
This blog’s comment section has declined from previous high standards. It’s strength has always been its swarm editing of blog posts. To that was added, some high quality juvenile snark, double entendre’s and occasional wit. Somebody, however, has let the cranks in, and now the immature giggles of the true Matt fans has been drowned out by the sound of grinding axes. It’s awash with frustrated Naderites, plain clothes commies, self-loathing trust fund scumbags all competing to call Obama the running dog of the capitalist class. Really this sort of 2nd Period Comintern rhetoric has already been done, and much better by any ragtag group of Trots with a mimeograph machine (look it up!) at the sour end of the 60’s.
Better commenters, please.
November 25th, 2008 at 8:38 am
The only thing I know about the TED spread is what I have read on sites like this and what I have heard about it on NPR. A question about it occurs to me, though, based on this graph:
What happened in the third quarter of ‘07 to cause the spike, and what, if anything, was done then? Didn’t that spike and the subsequent graph make it apparent that something really bad was about to happen?
November 25th, 2008 at 9:15 pm
This thread’s probably dead by now but something occurred to me: it’s likely that the TED drop was strongly affected by the suspension of mark-to-market accounting for mortgage related assets.
December 9th, 2008 at 5:22 pm
The Iraq-US military deal calls for US troop withdrawal from Iraq by 2011, the very thing President Bush vehemently opposed PRESIDENT George W Bush appears to have had to back down from his long-held opposition to an unconditional troop
January 3rd, 2009 at 10:59 pm
comment3,
January 4th, 2009 at 12:58 am
comment2,
January 4th, 2009 at 1:33 pm
comment1,
January 4th, 2009 at 5:52 pm
comment4,
January 5th, 2009 at 2:15 am
comment6,
January 5th, 2009 at 8:43 am
diaf ecpv tkmvjd jrdchiqz ztjmgbfk pgoqjxd ilwe
January 17th, 2009 at 5:17 am
comment5,
March 11th, 2009 at 5:38 am
Incredible site!
March 13th, 2009 at 12:39 am
Very interesting site. Hope it will always be alive!
March 14th, 2009 at 6:22 am
It is the coolest site,keep so!
xanax
March 22nd, 2009 at 6:42 am
tramadol
If you have to do it, you might as well do it right
March 22nd, 2009 at 10:47 am
buy viagra online
I bookmarked this site. Thank you for good job!
April 2nd, 2009 at 6:06 am
Great site. Good info
buy cheap viagra
April 14th, 2009 at 10:06 am
Thanks for the review!
viagra