And yet now, a month later, the economy has not gotten worse. Compared to the bleak expectations then, even just hanging in there would have been an upside surprise. But it’s more than that. Things actually are getting better.
Luskin begins with earnings. Sure, he admits, GE had a bit of a disaster this quarter. But besides that little hiccup, “the news has been terrific.”
Better than expected, maybe. Terrific? Hardly.
Luskin goes on to tell us:
The worst is over. It’s more than over.
Apparently The New York Times, and just about everyone else, didn’t get the memo. In a Tuesday piece on the scramble for capital, the paper says:
The pain is far from over. Even the most optimistic forecasters say banks will suffer billions of dollars in additional write-downs on mortgage investments and other debt in the months ahead.
If the pain isn’t over at the banks, then it isn’t over in a lot of other places, either.
And how about those out-of-control home foreclosures and falling-off-the-chart home sales? Skyrocketing energy prices? Out-of-control food costs here and everywhere? Rising unemployment? Believe us, the list could go on. Architectural billings, anyone?
So what if there was some excess home building and home buying? So what if some stupid banks made some stupid loans, and some stupid home buyers took those stupid loans and now can’t pay them back? It’s a problem, I suppose. But in the end it’s a side show.
We understand the value of the contrarian argument, but this one is poorly supported.
Strong work from Sidel
A Credit to the WSJ for a page-one piece that shows the paper, at least for now, gives space to some stories.
Robin Sidel reported last Monday that small and midsize banks are starting to feel the impact of their imprudent lending, an under-examined side of the credit crisis.
Why are many smaller banks in a bind?
Some, feeling squeezed by competition from mortgage companies or brokerage firms, expanded into new lines of business or tried to undercut big banks’ rates. Others were seduced to expand across state lines after interstate-banking restrictions were lifted a decade ago. Credit unions revved up real-estate lending, in part as some states relaxed laws that limited their operations to a single community or employee group.
A clear, concise explanation, including both misguided strategies and weaker regulations.
Credit to The New York Times for its smart story on Robert Rubin’s ambiguous role at Citigroup. He was chairman of the executive committee, whatever that means, and held enormous sway at the bank even as it led the economy into the credit crisis. Still, he apparently believes he was in charge of, and responsible for, nothing. His attempts to shore up his reputation remind us of Alan Greenspan’s.
“I don’t feel responsible, in light of the facts as I knew them in my role,” he adds.
Got it. Thanks.
The piece includes a devastating anecdote showing how Rubin, as treasury secretary, killed a measure to shore up derivatives regulation that could have averted the worst of the current crisis. The anecdote, in which Rubin dresses down the head of the Commodities Futures Trading Commission, is based on a first-hand account by Michael Greenberger, then the commission’s director of trading and markets, who was there:
At an April 21, 1998, meeting with Brooksley Born, the chairwoman of the commodities commission, Mr. Rubin made no secret of his feelings about her proposal. “It was controlled anger. He was very tough,” Mr. Greenberger recalls. “I was at several meetings with him, and I’ve never seen him like that before or after.” Ms. Born didn’t return calls for comment.
We wish there were more on Rubin’s role in the repeal of Glass-Steagall. The law that replaced it was formulated under Rubin, signed under his successor and essentially ratified the 1998 merger that created Citigroup, the source of many of our woes.
Good look at statistics vs. reality
A Credit to Harper’s for Kevin P. Phillips’s piece “Why the Economy Is Worse Than You Know,” (subscription required) about how government statistics have given us a falsely positive view of the economy over the past few decades.
Definitions of key stats, like the consumer-price index and gross domestic product, have gradually departed from reality, writes Phillips.
the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity that it actually is.
Phillips doesn’t see any conspiracies behind this statistical debasement, but sees a series of “accumulating opportunisms” and blames both Republicans and Democrats.