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Can the Rescue Plan Fix the US Economy? - Frank Shostak - Mises Institute
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At the root of the problem are not mortgage-backed assets as such but the Fed's boom-bust policies. It is the extremely loose monetary policy between January 2001 and June 2004 that set in motion the massive housing bubble (the federal-funds-rate target was lowered from 6% to 1%). It is the tighter stance between June 2004 and September 2007 that burst the housing bubble (the federal-funds-rate target was lifted from 1% to 5.25%).
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My Presidential Endorsement.. « blog maverick
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Senators McCain and Obama, failure to recognize that what the financial markets went through changed the fabric of our economic model and in turn the impact of your economic policy is completely irresponsible.
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Diamond and Kashyap on the Recent Financial Upheavals - Freakonomics - Opinion - New York Times Blog
The best summary I've seen so far.
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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.
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As their own funding dries up, the remaining financial firms will be much more cautious in extending credit to normal firms and individuals. So even for people whose own circumstances have not much changed, the cost of the credit is going to rise. For an individual or business that falls behind on payments or needs an increase in short-term credit because of the slowing economy, credit will be much harder to obtain than in recent years.
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