Barack Obama

[randolph]

Article by Paul Krugman

October 7, 2009, 8:58 am
Still chasing shadows?

This article on the continued troubles in credit markets was informative. But it raised a puzzle. Call me naive, but why does Fed policy seem to assume that the only way to repair credit markets is to return to the status quo ante, circa January 2007?

Here's how I think about what has happened these past 2+ years. I think in terms of a sort of flow chart, showing ways that savers can connect with borrowers:

Traditionally - i.e., before the 1980s - the public put its money in banks, and banks made loans to borrowers: thus the diagonal arrow from banks to borrowers represents traditional banking.

By 2007, however, much of this traditional channel had been supplanted by shadow banking: debt was securitized, and the securities sold to the public - the straight arrow across the bottom of the figure.

Then the crisis came. The public rushed for safety, which basically meant guaranteed deposits. One rough indicator is holdings of MZM - money of zero maturity - which is the sum of bank deposits and money-market deposits:

In effect, the public rushed back into the banks. But the banks weren't willing to lend out these excess funds. Instead, they accumulated deposits at the Fed:

To prevent a complete collapse of credit, the Fed in effect recycled these deposits back into private credit via the TALF and other securities-purchase programs. So funds now flow all around the first figure, getting to the public via "Bernanke banking" (my term.)

Everyone agrees that this is a stopgap, and we want to get the Fed out of the business of private lending over time.

But here's my question: why does it have to be a return to shadow banking? The banks don't need to sell securitized debt to make loans - they could start lending out of all those excess reserves they currently hold. Or to put it differently, by the numbers there's no obvious reason we shouldn't be seeking a return to traditional banking, with banks making and holding loans, as the way to restart credit markets. Yet the assumption at the Fed seems to be that this isn't an option - that the only way to go is back to the securitized debt market of the years just before the crisis.

Why? Are we still convinced that securitization is a far superior system to conventional banking, and if so why?

Inquiring minds want to know.

[new believer]

TracyCoxx, you at least know something that your critics don't. Law, Reality and facts behind rhetoric. The one remark about W being the one above all to be impeached showed their own lack of knowledge of law , their willingness to jump in with the 'ship of fools' and quite possibly could be benefitting from the smae folks who consistently raise our taxes to procure votes from those that don't pay taxes. And that group is getting larger daily.
But aside from W and impeachment, as recent I say EVERY person who knowingly allowed BO (he is NOT a Born American)to not only run but to grant him the office through the voter fraud should be impeached then executed for treason. And with B.Clinton, minimally two felony counts he was fined for by a federal judge of over 1/4 million dollars and barred from practicing and any connection of a law firm for 7 years should have been a automatic removal.(1-He willing lied & withheld information obstructing justice and 2- He tried to get others to alter their testimony. On #1,he could have pled the 5 admendment,but that was embarressing. It's the #2 that was most damaging) Finally, Congress had indeed impeached him. The Senate did not (which would have made gore President.)because by a very slim margin, the senators who voted against impeachment were warned not to. Does that explain the 'missing' FBI files?(Filegate) You know, the files that were taken illegally by a gutter bar bouncer hired by hillary and found a year later,after the hearings were over, with only her fingerprints on them on a table OUT IN THE OPEN. Funny how the media dropped that ball.

PS Tracy your now my 2/3 favorite person on this forum. You have brains and spunk.And if that is your pic on the avatar, beauty.

[transjen]

Originally Posted by new believer

TracyCoxx, you at least know something that your critics don't. Law, Reality and facts behind rhetoric. The one remark about W being the one above all to be impeached showed their own lack of knowledge of law , their willingness to jump in with the 'ship of fools' and quite possibly could be benefitting from the smae folks who consistently raise our taxes to procure votes from those that don't pay taxes. And that group is getting larger daily.
But aside from W and impeachment, as recent I say EVERY person who knowingly allowed BO (he is NOT a Born American)to not only run but to grant him the office through the voter fraud should be impeached then executed for treason. And with B.Clinton, minimally two felony counts he was fined for by a federal judge of over 1/4 million dollars and barred from practicing and any connection of a law firm for 7 years should have been a automatic removal.(1-He willing lied & withheld information obstructing justice and 2- He tried to get others to alter their testimony. On #1,he could have pled the 5 admendment,but that was embarressing. It's the #2 that was most damaging) Finally, Congress had indeed impeached him. The Senate did not (which would have made gore President.)because by a very slim margin, the senators who voted against impeachment were warned not to. Does that explain the 'missing' FBI files?(Filegate) You know, the files that were taken illegally by a gutter bar bouncer hired by hillary and found a year later,after the hearings were over, with only her fingerprints on them on a table OUT IN THE OPEN. Funny how the media dropped that ball.

PS Tracy your now my 2/3 favorite person on this forum. You have brains and spunk.And if that is your pic on the avatar, beauty.

Oh brother another loyal Bush fanactic, So you think lieing to congress and the citizens of the USA not grounds for imoeachment go back and watch W's state of the union where W claims IRAQ is prepareing to go nuclear and he gave congress the same cock and bull story to start the IRAQ war wasting trillions of tax dollars and thousands of US troops there lives for W's lies.
Then you give the standard GOP crap about taxes, What did Reageans trickle down accomplish in the 80s nothing but the rich getting richer and a sea of red ink in which the GOP didn't give a rat's ass about until Clinton became president then lo and behold the GOP wouldn't stop complaining about the sea of red ink Regan and Bush created and now it's the same crap coming from the right and agian this mess was created by trickle down econmics tax cuts only for the rich all from W and what did it accomplish agian the rich got richer and a sea of red ink that only now are you raising a stink, If the GOP really cared then they would call for the Bush tax cuts to be repeeled but we all know that we never happen because they'll say raising taxes on the rich will destory the ecomy So what jobs were created by tax cuts for the rich? Trickle down didn't work in the 80s and it didn't work for W and yet tax cuts for the rich is still the GOP's answer for everything
Jerseygirl Jen

[TracyCoxx]

Originally Posted by transjen

Oh brother another loyal Bush fanactic, So you think lieing to congress and the citizens of the USA not grounds for imoeachment go back and watch W's state of the union where W claims IRAQ is prepareing to go nuclear and he gave congress the same cock and bull story to start the IRAQ war wasting trillions of tax dollars and thousands of US troops there lives for W's lies.

Enough Jen. You have zero credibility with this claim until you can answer this question:

Originally Posted by TracyCoxx

There was a commission set up to find out what happened wasn't there? What were the results of that?

I know your world probably doesn't recognize any such commission. Be brave though and take a look at reality.

Originally Posted by transjen

So what jobs were created by tax cuts for the rich?

Well, look at unemployment rates after Reagan became president, and compare them to unemployment rates after he left office. There's your answer.

[transjen]

Originally Posted by TracyCoxx

look at unemployment rates after Reagan became president, and compare them to unemployment rates after he left office. There's your answer.

So you credit trickle down for that ok then why didn't it work for W? More jobs were lost then were created under hiw watch and W with full support of the GOP brought back Reaganomics so where were the jobs? And last i checked none of the Bush tax cuts have been done away with so Reaganomics are still in effect so where are the jobs? Regeanomics = massive debit and nothing else


Jerseygirl Jen

[TracyCoxx]

Originally Posted by transjen

So you credit trickle down for that ok then why didn't it work for W? More jobs were lost then were created under hiw watch and W with full support of the GOP brought back Reaganomics so where were the jobs? And last i checked none of the Bush tax cuts have been done away with so Reaganomics are still in effect so where are the jobs? Regeanomics = massive debit and nothing else


Jerseygirl Jen

Probably because Bush and/or his democrat congress spent too much. And yes, I've said Bush has over spent before - partially because of good reason. We were at war, and security and intelligence gathering had to be increased. And partially because in some areas they just over spent. But as I've said before, Bush is a rank amateur compared to Obama when it comes to overspending.

[transjen]

Originally Posted by TracyCoxx

Probably because Bush and/or his democrat congress spent too much. And yes, I've said Bush has over spent before - partially because of good reason. We were at war, and security and intelligence gathering had to be increased. And partially because in some areas they just over spent. But as I've said before, Bush is a rank amateur compared to Obama when it comes to overspending.

So you are saying W's massive job losses was do to his overspending????At the time Reagan's debit was the biggest in history only topped by the debit created by the first George Bush and yet you credit them for there massive job creation, Sorry i can't blame W's over spending on this one i blame it on 20 years of NAFTA and massive outsourcing of jobs overseas for cheap labor as nothing is made here in the US anymore


Jerseygirl Jen

[TracyCoxx]

Originally Posted by new believer

TracyCoxx, you at least know something that your critics don't. Law, Reality and facts behind rhetoric. The one remark about W being the one above all to be impeached showed their own lack of knowledge of law , their willingness to jump in with the 'ship of fools' and quite possibly could be benefitting from the smae folks who consistently raise our taxes to procure votes from those that don't pay taxes. And that group is getting larger daily.

Thanks New Believer. That group that doesn't pay taxes is getting close to 50%. The way things are going they will be more than 50%. Do you know what it's called when a majority votes for a minority to pay all the taxes? Taxation without representation.

And about law... it seems that it's usually the conservatives who know the law, and liberals couldn't give a damn about it. Sure, some right wingers break the law, but they get busted and do their time. If someone on the left breaks the law, people tend to ignore it. Or you're called a racist if you dare bring up the fact that they're breaking the law. How many times did ACORN break the law before their image started to get merely tainted? Literally hundreds. After being charged with voter fraud in a national election in 14 states, after registering people to vote 87 times, after registering Mickey Mouse to vote, they were granted $4 billion and allowed to help do the census. In what world does this make any sense? It wasn't until video after video showing they're an organization filled with criminals that they finally got their money yanked away. And what was their response when they were caught red handed? They threatened to sue the reporters that showed what kind of organization they are. Congress voted to pull their funding, yet somehow money that was supposed to go to firefighters in Louisiana is now going to ACORN.

When BO was accused of not being a naturally born US citizen, his response was 'how dare you accuse me of that' and spent millions on lawyers to keep from showing his birth certificate in court, rather than take 5 minutes to just put the matter to rest. If I'm a janitor at Wal-Mart, I have to show my social security card, but a candidate for President of the United States doesn't have to show his credentials? Bullshit!

Black Panther members were charged with intimidating voters with weapons. They were tried and convicted. BO overturned it.

White Americans are expected to make their mortgage payments. If they can't they lose their house. They are pissed, embarrassed, depressed, etc, but they accept it because that is how the system works. But not if they're black. Then it's those racist bankers taking their house away.

Many liberal politicians and 'community activists' make a career out of telling minorities the law does not apply to them.

These liberals form their own world with versions of facts and rules that are not based on reality. And anything that goes on in the real world simply does not apply in their world. And our society is more and more frequently letting them get away with it.