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The new administration answers its first economic policy question

Bloomberg describes the aggressive additional steps by the government to buttress Citigroup, $20 billion in preferred stock and loss protection on $306 billion in troubled assets:

The regulators stepped in to protect Citigroup from losses on a $306 billion pile of troubled U.S. home loans, commercial mortgages, subprime bonds and corporate loans when the firm’s tumbling share price sparked concern that depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries. The $20 billion of new cash comes on top of a $25 billion infusion the bank received last month under the Troubled Asset Relief Program…

As arguably the first economic act of the Obama administration, the capital bolstering of Citibank tells us that the new Treasury Secretary, Tim Geithner, is not going to repeat the enormous mistake by the government in letting Lehman Brothers fail (an act for which he himself had been blamed). Removing systemic risk is a necessary, if not sufficient, precondition for recovery, and that clearly seems to be the intent of this initial econommic act of the new administration.

This entry was posted on Monday, November 24th, 2008 at 6:39 pm and is filed under business, Democrats, Republicans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “The new administration answers its first economic policy question”

  1. gs Says:
    November 24th, 2008 at 9:30 pm

    Removing systemic risk is a necessary, if not sufficient, precondition for recovery, and that clearly seems to be the intent of this initial econommic act of the new administration.

    Ben Stein is no liberal Democrat, but:

    I hate to say it, but I think we are lucky Mr. Obama won the election. Of course, time will tell.

    Indeed. I agree with both sentences. Bush looked good for over two years.

  2. Canucklehead Says:
    November 24th, 2008 at 10:03 pm

    This capital bolstering is viewed by many bloggers as insufficient for a one time fix. Time will tell. It could well be that Citi is patched up simply to pass the hurdle of January 20th deadline. What will it look like mid-summer 2009?

    Now everyone can move on to Bank of America and JP Morgan. Let’s see how those pictures unfold. Once this counter trend rally plays out, BOA and JPM had better be ready.

    It is now interesting to see how the Big 3 will be treated.

    As things stand, liabilities appear to be $7.4 Trillion. Would a 20% jump between now and summer 2009 cause any indigestion? How about 25%?

    I believe all this talk about stimulus will simply cause a conservative taxpayer to forego all consumption other than the basics. Let’s see how tight the belt becomes.

  3. staghounds Says:
    November 26th, 2008 at 2:41 pm

    What enormous mistake? Since when is it the taxpayers’ responsibility to buy worthless shares of failed companies?

    I know it’s happening- but every bailout, no matter how small or large, is a mistake and a punishment for thrift and prudence. Every single one, every single cent.

    Screw Lehman Brothers, and all the other people who bet wrong. Welcome to liberty.

    I didn’t see Lehman, or Citigroup, or GM, running around trying to bail anyone out year before last, when times were good.

    Or can I get a bailout on last night’s lottery tickets?

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