George Soros assesses the Financial sector meltdown

I don’t like or agree with Soros, but I thought this was revealing:

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In the past, whenever the financial system came close to a breakdown, the authorities rode to the rescue and prevented it from going over the brink. That is what I expected in 2008 but that is not what happened. On Monday September 15, Lehman Brothers, the US investment bank, was allowed to go into bankruptcy without proper preparation. It was a game-changing event with catastrophic consequences.

For a start, the price of credit default swaps, a form of insurance against companies defaulting on debt, went through the roof as investors took cover. AIG, the insurance giant, was carrying a large short position in CDS and faced imminent default. By the next day Hank Paulson, then US Treasury secretary, had to reverse himself and come to the rescue of AIG.

But worse was to come. Lehman was one of the main market-makers in commercial paper and a large issuer of these short-term obligations to boot. Reserve Primary, an independent money market fund, held Lehman paper and, since it had no deep pocket to turn to, it had to “break the buck” – stop redeeming its shares at par. That caused panic among depositors: by Thursday a run on money market funds was in full swing.

The panic then spread to the stock market. The financial system suffered cardiac arrest and had to be put on artificial life support.

How could Lehman have been left to go under? The responsibility lies squarely with the financial authorities, notably the Treasury and the Federal Reserve. The claim that they lacked the necessary legal powers is a lame excuse. In an emergency they could and should have done whatever was necessary to prevent the system from collapsing. That is what they have done on other occasions. The fact is, they allowed it to happen.

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I don’t think Timothy Geithner is a wunderkind.  I think he is directly responsible for this mess and he is being billed as some type of boy genius that will now save the day.  Here is what his wikipedia page says about it: “he is believed to have played a pivotal role in both the decision to bail out AIG as well as the government decision not to save Lehman Brothers from bankruptcy.”

Plus, he is a tax cheat.

So I’ll use the Soros assessment that the Lehman bankruptcy was the catalyst and I say that Geithner was instrumental in that.  Why do we think the same people that got us into the mess will be the ones that can get us out?   

 

 

US Postal Service

I used to say irrelevantly that the Postal Service was the only Federal Government program that could effectively deliver services. I guess that isn’t true anymore:

Faced with dwindling mail volume and rising costs, the post office was $2.8 billion in the red last year and, “if current trends continue, we could experience a net loss of $6 billion or more this fiscal year,” [Postmaster] Potter said in testimony for a Senate Homeland Security and Governmental Affairs subcommittee.

They are discussing dropping one delivery day a week as a cost savings measure. Sounds like a decent solution, until they get to their Government math:

A study done by George Mason University last year for the independent Postal Regulatory Commission estimated that going from six-day to five-day delivery would save the post office more than $1.9 billion annually, while a Postal Service study estimated the saving at $3.5 billion.

But here is the real golden nugget where a bureaucrat, the Postmaster General acknowledges that increasing rates leads to decreasing revenue.

The next postal rate increase is scheduled for May, with the amount to be announced next month. Under current rules that would be limited to the amount of the increase in last year’s consumer price index, 3.8 percent. That would round to a 2-cent increase in the current 42-cent first class rate.
The agency could request a larger increase because of the special circumstances, but Potter believes that would be counterproductive by causing mail volume to fall even more.

Got that Democrats. Raise the tax rates and you will get less revenue

Good Summary

I like George Bush the man.  I don't think he is as evil or stupid as many folks make him out to be.  But I do agree with this article critical of Bush's legacy.

 

Bush's Legacy: Conservatives Were Betrayed

Can the Government spend and regulate its way out this mess?

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

 

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

 

Ironically, our work shows that the recovery would have been very rapid had the government not intervened."