White House MemoRescue of Mortgage Giants Displays Paulson’s Clout
By SHERYL GAY STOLBERG
Published: September 9, 2008
The Treasury secretary has led President Bush where he would not usually go: into government intervention in the markets
http://www.nytimes.com/2008/09/09/business/09bush.html?ex=1378699200&en=e8201643221576a3&ei=5124&partner=permalink&exprod=permalink
Has anyone read the former Treasury Secretary O'Neil's book? It was great... but aside, anyone have any thoughts on the F&F situation- should the government have stepped in? How will this affect interest rates in the future?
My thoughts are unsure as I don't claim to know too much about the subject. I would guess though, from basic economic theory that the positive reaction by the financial markets comes from false security. Not that the government won't financial back up F&F, but instead that true market risk has been once again push aside, disallowing an unbiased market interest rate to appear. Not letting these companies bear the risks they took on, will slowdown the markets ability to readjust itself, skewing the going interest rate allowing people to get interest rates not truly reflective of the market and its risk.
Comments welcome.
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1 comment:
The F&F situation reminds me of when a drunk buddy shows up to the party. He's usually funny and entertaining, so you let him in. But before long he starts breaking shit and hitting on your girlfriend. If/when you get the balls to kick him out, he's already made a mess and crashed the party. The fact that you let him in the first place means it's more likely he'll show up at the next party.
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