Is bad market news good TARP news?

The DOW dropped over 4 percent today, apparently in response to Geithner's incomprehensible announcement about the new TARP plan. Most news stories seemed to take the drop as a sign that it's a bad plan.

I think not. Notice banks did much worse than average: BofA lost nearly 20%, Citi about 15%, American Expressn and JP Morgan about 10%. That signals the Treasury doesn't want taxpayer dollars going to bank equity. We want the money lent out. We want taxpayers to get a good deal on assets they buy. That means shareholds should lose. So the drop could be good news for the new TARP plan.

There seems to be a lot of uncertainty about the details of this plan but I don't think the market crash is bad news at all. It seems, at least, that they are trying to do this without giving a windfall to equity holders in the banks. At the same time, they're going to try to do it without nationalizing them. It will be hard to do both. We shall see...

Comments

Post a Comment

Popular posts from this blog

Nonlinear Temperature Effects Indicate Severe Damages to U.S. Crop Yields Under Climate Change

Image
It's been a long haul, but my coauthor Wolfram Schlenker and I have finally published our article with the title of this blog post in the Proceedings of the National Academy of Sciences . We've been told that it would show up on the early-edition website this week. It hasn't shown up there yet so I guess it will come out tomorrow [Friday 8/28], probably late afternoon EST. UPDATE: You can find the article here . We set out to develop a better statistical model linking weather and U.S. crop yields for corn, soybeans and cotton, the largest three crops in the U.S. in production value. Our major new finding is that (by far) the best predictor of yield is a measure of extreme heat: how much temperatures exceed about 29C (84F) during the growing season. The threshold varies somewhat by crop--29C is the threshold for corn. Below this threshold, warmer temperatures are more beneficial for yields, but the damaging effects of temperatures much above 29C are staggeringly large. A
Read more

Renewable energy not as costly as some think

Image
The other day Marshall and Sol took on Bjorn Lomborg for ignoring the benefits of curbing greenhouse gas emissions.  Indeed.  But Bjorn, among others, is also notorious for exaggerating costs.  That fact is that most serious estimates of reducing emissions are fairly low, and there is good reason to believe cost estimates are too high for the simple fact that analysts cannot measure or imagine all ways we might curb emissions.  Anything analysts cannot model translates into cost exaggeration. Hawai`i is a good case in point.  Since moving to Hawai`i I've started digging into energy, in large part because the situation in Hawai`i is so interesting.  Here we make electricity mainly from oil, which is super expensive.  We are also rich in sun and wind.  Add these facts to Federal and state subsidies and it spells a remarkable energy revolution.  Actually, renewables are now cost effective even without subsidies. In the video below Matthias Fripp, who I'm lucky to be working w
Read more