September 21st, 2008


Про социалистическое спасение капитализма...

On greed, let me repeat: If unusually many airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual. And let me add: This isn’t a morality play. What we’re seeing are the consequences of monetary-policy distortions of interest rates and regulatory distortions of incentives, amplified in some degree by private imprudence, not the consequences of blackheartedness.
On Paul Krugman’s take on the possible rescue plan

Over the entire history of human finance, the underlying premise of all credit transactions -- loans, mortgages, and all debt instrument -- has been the borrower's ability to repay.
From 1 million B.C. up until the present, repayment ability was the dominant factor.
That may sound simple, but it becomes even more stark when viewed over a time line.

<-1 million B.C. --------------------------- 2002-07 ---2008->

Except for that 5 year period, the entire history of human finance was rather reasonable about the basis for making loans in general, and extending mortgage loans in particular.
The Underlying Basis of Finance & Credit

The law of unintended consequences

"If a chemical system at equilibrium experiences a change in concentration, temperature, volume, or total pressure, then the equilibrium shifts to partially counter-act the imposed change." (Le Chatelier's principle, also called the Le Chatelier-Braun principle)

The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple, it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences.
"The Law of Unintended Consequences", Alex Tabarrok

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У них просто не было другого выхода кроме как прикончить Lehman

Given the potential chaos that would have resulted from Bear Stearns filing for bankruptcy, the Fed had little choice but to engineer a rescue. In doing so, the Fed argued that the rescue was a rare, perhaps once-in-a-generation, event.
When Bear was rescued, the Fed created a new lending facility to help provide bridge financing to other investment banks.
Against this backdrop, if the government had rescued Lehman, it would have repudiated the claim that the Bear rescue was extraordinary; it would have also conceded that in the six months since Bear failed, neither the new facility that it set up nor the other steps to make markets more robust were reliable. Essentially, the Fed and the Treasury would have been admitting that they had lied or were incompetent in stabilizing the financial system — or both.

The F.A.Q.’s of Lehman and A.I.G.
By Douglas W. Diamond and Anil K. Kashyap