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Ben Bernanke has clearly picked up some tips from his predecessor. Yesterday, he aimed to soothe the market by noting that everything is hunky-dory.
"My view is that — taking all the new data into account — that there is really no material change in our expectations about the U.S. economy."
The next morning, as if on cue, the markets open nearly two percent down.
Posted by dan at 09:45 AM
Stephen Labaton reports in the New York Times that SEC Chairman Christopher Cox, after a promising start, may be regressing to the Bush administration mean:
In recent weeks, however, Mr. Cox has begun to send signals, both directly and through aides, that he may be swinging the pendulum more toward business and Wall Street interests and against investor groups.Some investor advocates and securities law experts say that Mr. Cox, by not pushing for tighter regulation of hedge funds and by urging the Supreme Court to adopt a tougher standard for investors in lawsuits, has begun moving closer to the business view that the administration overreacted to the corporate scandals that began with the collapse of Enron in 2001.
They have also criticized his recent decision to appear at the Chamber of Commerce in two weeks just as it is to issue a report criticizing the Bush administration and the S.E.C. for being too hard on companies.
“You look at a parade of items and it begins to look to me like this commission is starting to take an historic shift away from investor interests,” said James D. Cox, a law professor at Duke University.
Posted by dan at 08:49 AM
Arthur Schlesinger, Jr., a great historian and a good man, has died.
One of my favorite pieces I wrote was one that was never published: a profile of Schlesinger I did for the New York Observer in 1993 or 1994. (In those dark, pre-internet days, if your story was killed because the editor-in-chief was trying to push your editor aside, you didn't have many alternatives.)
I had sent Schlesinger a letter explaining my interest in writing about him, and, after receiving a self-deprecating, typewritten letter in response, interviewed him in his CUNY office--he chomped on a cigar, his trademark bowtie hanging loose arouund his neck.
I had recently dropped out of Harvard's ph.d. program in American history to resume a career in journalism. I left for a bunch of reasons, mainly because my attention span was way, way too short to write a dissertation, and because I broke into cold sweats every time I entered the document room in Houghton Library.
There was another reason I left. Before entering graduate school, I had worked at the New Republic. And I had (naively) assumed that graduate school would be something like a continuation of my year at TNR, that the history department would be stocked with Schlesingers and Schlesingers in the making--historians who were interested in politics past and present, public intellectuals just as willing to talk about the (first)Bush administration as the first Cleveland administration, people interested in writing for and speaking to a broad, high-to-middlebrow audience.
Well, there were some of those types there. But not that many. And the sort of history that Schlesinger did so brilliantly--synthesizing, broad, political, present-minded--was out of fashion. Still, then--and now--Schlesinger represented to me what a great historian should strive to do: use a superior understanding and knowledge of the past not simply to help us understand history better, but to make more sense of the world in which we live. He even took to blogging in his 88th year.
Schlesinger will be remembered, and justly so, for many of his books: The Age of Jackson, The Imperial Presidency, A Thousand Days--with its great first line, "It all began in the cold,"--and his excellent memoir.
The best of all, however, is his three-volume history of the New Deal. This fall, as I was doing some research about the 1920s and 1930s, I turned, time and again, to the Age of Roosevelt. And, really, what can you do? In the 45-50 years since these volumes were published, a great deal of very good academic work has been done, by historians and economists, on the late 1920s and the 1930s. But for anyone trying to make sense of what happened during that enormously important era, The Age of Roosevelt remains, after all these years, the place to start.
Posted by dan at 08:18 AM
Or don't. My latest in Slate, on Tuesday's market meltdown.
Posted by dan at 08:16 AM
One of the stories plugged on the cover of the current (March 12) issue of Forbes:
"Has the Bull Market Just Started?"
Posted by dan at 06:37 PM
The Federal Railroad Administration denies an application by a privately held railroad company for a $2.3 billion loan to build a new railroad that will service Wyoming's Powder River Basin.
That's good for taxpayers. In this climate, the notion that entrepreneurs need government financing and assistance to build new transportation infrastructure is silly. Of course, it wasn't always such. One of the themes of my new book on investment bubbles, due out in early May, is the way in which the U.S. government--through tax policy, grants, loans, and subsidies--has helped kick off and sustain investment bubbles. The second chapter deals with the railroads.
It is frequently forgotten and easily overlooked that without massive federal land grants and loan subsidies, the transcontinental railroads, which helped open up Wyoming and the rest of the west to development, would likely not have been built as rapidly as they were.
Posted by dan at 09:29 AM
The pop in the subprime mortgage bubble means home-buyers can no longer depend on banks to lend them the entire purchase price of a new home. But in the private equity world, well-heeled investors are finding that banks are perfectly willing to lend them money to make the down payments on the assets they want to buy. Andrew Ross Sorkin reports in the New York Times:
Wall Street banks have provided billions of dollars to finance takeovers in the last year, essentially serving as mortgage lenders to deal-hungry private equity firms, which are among the banks’ best-paying customers.Now the lenders have created a new type of loan that has them ponying up part of the down payment on these deals as well. That trend is vividly illustrated in the $45 billion buyout of the Texas energy giant TXU, which was announced yesterday. There are risks in the transaction, as there are in any large buyout, but for the Wall Street banks behind the deal, it could be even riskier.
In an unusual twist that may soon become common, the banks are going one step further than simply providing the debt financing involved in the deal, in this case a daunting $24 billion of debt.
The banks are also lending $1 billion to TXU’s buyers, Kohlberg Kravis Roberts & Company and the Texas Pacific Group — not as secured debt, but in the form of equity using the bank’s own cash.
Hey, Andy Kessler, you know something about investment crazes and excesses. How do you think this will end up?
“This is how things blow up; people take more risk,” said Andy Kessler, a former research analyst and hedge fund manager who has written books about Wall Street. “If you go back to the crash of 1987, all the banks had huge bridges that went bust.”
Posted by dan at 09:11 AM
Monday, Feb. 26: Former Federal Reserve Chairman Alan Greenspan beams his wisdom to an audience in Hong Kong.
Tuesday, Feb. 27: Chinese stocks fall nearly 10 percent.
Special World is Flat bonus anecdote. Note the way Chinese analysts have quickly assimilated the technique, developed over several decades by U.S. analysts, of using fatuous cliches to explain baffling market activity.
''The most important reason for today's decline was pressure for profit-taking,'' said Peng Yunliang, a senior analyst at Shanghai Securities.''People viewed 3,000 as a psychological benchmark. It's understandable they might want to pull back after the market hit that peak,'' Peng added.
Posted by dan at 08:45 AM
My latest in Slate--Mitt Romney's serial flip-flopping explained!
Posted by dan at 08:01 AM
Rudy Giuliani reveals that he thinks Robert Rubin is a Communist. The AP reports:
''What we understand as Republicans is that, sure, the government is an important player in this, but we are essentially a private economy. What Democrats really believe ... is that it is essentially a government economy.''
Is this really the best he can do?
Posted by dan at 05:33 PM
Apparently, a commission advising the U.S. Postal Service doesn't have a great deal of faith in its fellow federal bureaucracy, the Federal Reserve, to carry out its core mission of ensuring price stability. The Associated Press reports:
The independent postal regulatory commission recommended a two-cent increase in the cost of mailing a letter Monday and urged the Post Office to introduce a "forever" stamp valid for first-class postage despite future increases.
Posted by dan at 11:47 AM