"Link exchange
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- Economist.com | NEW YORK
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- The econoblogosphere
TODAY'S recommended economics writing:
• The US government may convert its existing loans to the nation's 19 biggest banks into common stock. This would make it the majority shareholder in several situations, so calling it a "back door to nationalisation" is a bit of an understatement. The NYT points out the problem: "That could lead to increasingly difficult conflicts of interest for the government, as policy makers juggle broad economic objectives with the narrower responsibility to maximize the value of their bank shares on behalf of taxpayers."
• On a related note, Paul Krugman fears America will turn Irish. "And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks."
• Good news: "Mentions of 'green shoots' in articles about the economy have increased enormously in the past couple of months".
• Felix Salmon lists ten reasons why finance and economics blogging will never take off in Germany. Ach nein!
• Leo Panitch reconsiders Karl Marx. "We now can see where ignoring Marx while trusting in Adam Smith’s 'invisible hand' gets you," says Mr Panitch. What foolish capitalists we've been. The amazing Marx even "had premonitions of AIG and Bear Stearns trembling" a good century and a half ago. Impressive.
• Willem Buiter eulogises the great Edie George, a former governor of the Bank of England. (Oddly, though, the post seems to be as much about Mr Buiter.) "
Don the libertarian Democrat wrote:
"(Oddly, though, the post seems to be as much about Mr Buiter.) "
A famous writer once wrote that the only reason to praise the dead in print is to remind readers that you're alive.
And:
Don the libertarian Democrat wrote:
"The Treasury would also become a major shareholder, and perhaps even the controlling shareholder, in some financial institutions. That could lead to increasingly difficult conflicts of interest for the government, as policy makers juggle broad economic objectives with the narrower responsibility to maximize the value of their bank shares on behalf of taxpayers.
Those are exactly the kinds of conflicts that Treasury and Fed officials were trying to avoid when they first began injecting capital into banks last fall. "
Come on. Any hybrid plan is going to ooze conflict of interest between the government and bank. It gets even oozier when the government becomes a shareholder and has a conflict of interest with itself.
That's why they want to have trustees if they get controlling interest:
http://www.nytimes.com/2009/04/20/business/20trustees.html?ref=business
"That could leave the trustees, who are each being paid $100,000 a year, in the awkward position of having to vote on a proposal that many taxpayers might support but that the government opposes.
The arrangement has raised questions about who really is in charge when the government bails out a major financial institution. Those questions could soon spread far beyond A.I.G.
The Treasury Department is poised to become Citigroup’s biggest shareholder, obtaining as much as 36 percent of its voting shares, and officials plan to turn over those shares to outside trustees as well. And if any of the 18 other large banks now undergoing government “stress tests” are told they need more capital, the government is likely to acquire more voting shares and turn them over to trustees, too."
Notice the title "Trustees". This time they've done a better job with the naming. It's certainly better than "Toxic Dispensers" or "Insolvent Sentinels", say.