Thursday, January 22, 2009

Sorkin, on ABC, warns of doubling bank bailout

Andrew Ross Sorkin (who looks fresh right off a college campus, but then, so does Chris Cuomo) warned on ABC Good Morning America at 7 AM this morning that the government is about to have to double the size of the bank bailout. As we’ve said, another $1.5 trillion is needed just for the banks immediately, and even more is needed in Europe.

The latest wave of bank panic resumed Friday when Bank of America found that it had to ask for $20 billion more to take care of Merrill Lynch, which it had acquired. Now everyone else is in line.

The ABC story isn’t up yet, but Sorkin’s own financial article in the New York Times, “Obama’s Bailout Challenge” is here on Jan. 19. I suspect he’ll have another one very shortly. Sorkin makes some comparison of Sweden’s staged nationalization of banks, but says our problem is much bigger. A good comparison, he says, is Japan in the 1990s.

Bank stocks rallied Wednesday, Obama’s first full day at work, but they’re likely to sink today as this talk goes around.

Timothy Geithner’s confirmation hearings Wednesday were underwhelming, with his own IRS problems and lack of specific gravity – sorry, specificity. Blomberg’s story is here.

The deficit and debt seems to grow every day. One tempting target that worries me: means testing the “earned entitlements” very quickly, which countries like Australia do now (although Australia has much stronger privatized retirement systems, which is what we should have had all along – so it couldn’t become cannon fodder for someone else’s mistakes). Other countries that have faced these problems, like Japan, have much more cohesive family structures (and “filial piety”) than we do. It’s a cultural confrontation that can grow quickly.

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