Mercury Rising 鳯女

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Archive for March 16th, 2008

Lightning from the skies

Posted by Charles II on March 16, 2008

This is a week for economic lightning to fall from the skies:

  • JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. for about $2 a share…The central bank will fund as much as $30 billion of Bear Stearns’s “less-liquid assets”…. [it closed on Friday at $30/share]
  • The Federal Reserve reduced the rate on direct loans to commercial banks by a quarter-point…The central bank, in a statement today in Washington, also extended the maximum term of discount-window loans to 90 days from 30 days…. Investors expect the Fed to lower its benchmark rate by as much as a full percentage point, to 2 percent
  • Euro/dollar at 1.575, yen at 97.9
  • Australia and Japan open down

Posted in economy | 1 Comment »

The unprecedented bailout and a parallel to fascism

Posted by Charles II on March 16, 2008

The decision of the Fed to provide capital indirectly to Bear Stearns is, if I am correct, completely unprecedented. On the Econbrowser boards, a poster challenged that characterization by recalling Continental Illinois, a bank that failed in the 1980s.

But Continental Illinois was a bank, and the funds came from at least primarily from the FDIC. Bear Stearns is not what we think of as a bank: “The company’s business includes corporate finance, mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services.”

In the Long Term Capital Management bailout, the Fed acted as the matchmaker, but I don’t think taxpayer funds were placed at risk.

There’s an interesting historical aspect to this. While the term “National Socialism” has many meanings, one aspect of fascism is socializing risk allegedly in the national interest while profits remain private:

Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because “the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social.”

As it happens, they may also have broken the law in bailing out Bear:

  • Fed Board: Direct Fed lending to individuals, partnerships, and non-bank corporations (IPC) such as BS much more stringent: only in 1)”unusual and exigent circumstances”; and 2) if IPC is not able to secure adequate credit accommodations from other banking institutions –>activation requires vote of min. 5 fed board members
  • Inner City Press Community on the Move group files complaint on grounds that only 4 Fed board members voted for BS emergency lending.

Posted in economy, mortgage crisis, totalitarianism | 6 Comments »

McCain Thumbs Nose At FEC

Posted by Phoenix Woman on March 16, 2008

Robert Emmet discusses it here.

McCain’s taking a big gamble. The statute of limitations allows for President Obama or President Clinton to appoint new FEC people in time to prosecute McCain.

Posted in 2008, conservativism, corruption, John McCain | Comments Off on McCain Thumbs Nose At FEC

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