Credits to Fortune and The Nation for broad but incisive pieces that explain the credit crisis and the economic slump. These pieces, one from within the temple of capitalism and the other from without, are clear, concise, and put the blame where it’s deserved.
Allan Sloan, in Fortune, invites all comers for a bit of 2008 Financial Crisis 101:
Why is Washington spending billions to bail out Wall Street titans while leaving struggling homeowners to fend for themselves? Why are the Federal Reserve and the Treasury acting as if they’re afraid the world may come to an end, while the stock market seems much less concerned? And finally, what does all this mean to those of us who aren’t financial professionals?
Sloan answers all these questions and more.
The only point that struck us as needing a bit more comment was Sloan’s suggestion that the Fed can’t run out of money—which he qualifies by saying, “at least, I don’t think it can.”
So we turn to The Nation on this point, where Jeff Faux explains that the Fed has only about $400 billion in free assets. Once those are used it must print money or get bailed out itself by the Treasury.
This piece assumes its audience is smart and can follow a complicated tale explained well. We all need to know what we’re paying for and why.
LAT’s About Face
What a difference a day makes.
A Debit to the Los Angeles Times for a Thursday story in which it scrambled to catch up with a Wall Street Journal scoopreporting that Katie Couric would probably relinquish her Evening News anchor spot “well before her contract expires in 2011.”
The LAT relied on CBS itself for its story, including “a person familiar with the situation” who said that “her exit is not in the works.”
But by Friday, the Times had more time to look into the situation and changed its tune, noting that Couric’s “departure is widely considered a foregone conclusion inside CBS News, according to half a dozen staffers bracing for another anchor transition.”
Reporting. There’s nothing like it.
A double Debit to Forbes this week, first for a segment in its editor-in-chief’s column that essentially says the U.S. economy will be okay because YouTube is popular and digital medical imaging is improving by leaps and bounds, and, well, a few other things. Advanced bacteria, for instance.
Don’t be misled by stock market gloom and lurid headlines on the credit crisis. The U.S. and, indeed, the global economy are on the verge of another surge of breathtaking innovations.
Like, um, movie downloads. Steve Forbes, in the span of two paragraphs, uses words like “breathtaking,” “dazzling,” “explosion,” “staggeringly”— and that’s not counting his italicized enthusiasms.
We get it. Innovation drives economic growth. Americans innovate a lot. But it takes credit and trust to get just about any company off the ground, and both are in short supply these days.
And that’s what makes the credit crisis so tragic: our out-of-control financial sector is wrecking the rest of the economy.
The wide-eyed Forbesian optimism continues in David Malpass’s column on how things really aren’t so bad.
The sharp U.S. slowdown and the recent loss in housing wealth should be put in the context of 4.8% unemployment and the housing gains of recent years, which are many times greater than the declines. With 138 million people formally employed on company payrolls and millions more working on their own, the biggest asset by far for American households is their future earnings.
Malpass espouses the everyone-is-to-blame line:
It’s easy to grouse about the economy and public policy. Mistakes have been made all around, with heavy penalties for some.
That’s the Wall Street line; if everyone is blame, of course, then no one is. So stop grousing, all you foreclosees!
He also disparages the idea that government should step in to regulate or “subsidize.”
The now popular storyline is that Washington must regulate and subsidize more to avert a 1930s-like depression.
That’s not the popular story line, by the way; the popular line is that regulation would tame Wall Street’s boom-and-bust excesses that hurt the real economy and that government intervention (not subsidies) would help ordinary people caught in the mortgage maw that Wall Street created. No wonder that line is popular.
Malpass, by the way, is chief economist at the soon-to-be-defunct Bear Stearns. We will take this sanguine forecast with a grain of salt.
FT’s recycled Wal-Mart news
A Debit to the Financial Times for a story on how Wal-Mart CEO Lee Scott plans to meet with Chinese suppliers in October to talk about environmental sustainability.