Several Items: Citigroup/stimulus, TBTF, Quakes

by Dollars and Sense

I will continue to post in digest form (multiple items) for a while—no luck on migrating the blog just yet. Soon, though. Here are this week's items:

(1) From Dean Baker (hat-tip to Mike Prokosch, who says, "CEPR outdoes itself here"):

Profits on Citigroup Stock: Can They Be the Basis for Financing Stimulus?

April 2010, Dean Baker

Last month the government announced plans to sell the stock it obtained in November of 2008 as part of its bailout package of Citigroup. The media jumped on the fact that, at the stock's current market value, the government stands to earn an $8 billion profit on this stock. This profit was widely touted as evidence of the success of the bailout. In reality, the government's profit on Citigroup stock was primarily the result of its own willingness to back up Citigroup. The increase in Citigroup’s stock price was largely driven by investors’ realization that the government would not let Citigroup fail. [Read the rest (pdf).]

(2) From Robert Reich, from a while back on his blog, but still salient (hat-tip to L.F.):

Break Up The Banks

Robert Reich | Monday, April 5, 2010

A fight is brewing in Washington—or, at the least, it ought to be brewing—over whether to put limits on the size of financial entities in order that none becomes "too big to fail" in a future financial crisis.

Some background: The big banks that got federal bailouts, as well as their supporters in the Administration and on the Hill, repeatedly say much of the cost of the giant taxpayer-funded bailout has already been repaid to the federal government by the banks that were bailed out. Hence, the actual cost of the bailout, they argue, is a small fraction of the $700 billion Congress appropriated.

True, but the apologists for the bailout leave out one gargantuan cost—the damage to the economy, which we're still living with (witness the latest unemployment figures). Leave it to the Brits to calculate this. Andrew Haldane, Bank of England’s Financial Stability Director, figures the financial crisis brought on by irresponsible bankers and regulators has cost the world economy about $4 trillion so far.

So while the bailout itself is gradually being repaid (don't hold your breath until AIG and GM repay, by the way), the cost of the failures that made the bailout necessary totals vast multiples of that. [Read the rest of the post.]

(3) Mark Engler on free trade and quakes (starting with Bill Clinton's mea culpa, which we mentioned a couple of days ago); hat-tip to Mark E. ;) :

"Free" Trade Makes Earthquakes Worse
Mark Engler | April 7, 2010 2:00 pm

Here's something you don't see every day: One of the most influential promoters of market fundamentalist "free trade" policies admitting that he screwed up big time—and that as a consequence people in Haiti are starving. Amazingly, that's just what happened in the lead-up to last week's International Donor's Conference on Haiti.

Earlier in March, Bill Clinton—currently honing his elder statesman chops by working on Haiti disaster relief—made a remarkable apology for the failure of policies he once championed. His statement was put in context in an excellent article by Associated Press reporter Jonathan Katz entitled, "With Cheap Food Imports, Haiti Can't Feed Itself." The article hasn't received nearly the attention it deserves, so if you missed it when it first came out, do check it out. [Check out the rest of Mark's post.]

That's all I've got for now--may post something on the weekend.

Labels: bailout, bill clinton, Citigroup, Dean Baker, earthquake, economic stimulus, Haiti, Mark Engler, Robert Reich

 

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4/09/2010 04:39:00 PM