In a year when the government enacted one of its largest-ever stimulus bills, guaranteed hundreds of billions of dollars in bank debt, bought hundreds of billions more in mortgage-backed securities, took 60 percent ownership of one car company and put up billions in financing for another, it’s not obvious why you’d dwell on an initiative that basically cost nothing. I nonetheless submit to you that the government’s stress tests—an eight-week effort to vet the balance sheets of the country’s biggest banks—was the single most consequential economic policy of 2009.
It's hard not to be somewhat encouraged by the announcement that Bank of America has reached a deal with Treasury to repay the $45 billion in "exceptional assistance" it received last fall and winter. BofA was one of two problem megabanks (the other being Citigroup) to receive such a mega-bailout, and at times looked like it would be years before it returned the cash.
I guess there are two theories on this question: 1.) That the Chinese have a huge amount of leverage over us because we owe them over $1 trillion; it's only natural that we'd pull our punches under the circumstances. 2.) Obama's believes you're more likely to make progress through patience and dialogue than with in-your-face demands; his instincts are conciliatory rather confrontational.
Earlier today, Treasury Secretary Tim Geithner was up at the House Financial Services Committee testifying on the administration's proposal for dealing with threats to the financial system ("Too Big To Fail," etc.).
For the handful of people in charge of saving the U.S. economy, it’s been a grueling season. The last eight months have featured endless back-and-forths, tense stalemates, and spirited confrontations. Larry Summers, the president’s chief economic adviser, has drawn blood with his lacerating quips. Treasury Secretary Timothy Geithner has dropped expletives to signal his frustration. Even their aides have gotten in on the action.
And, in those rare instances when the wonks get a break, they step outside their conference rooms, loosen their ties, and do the same thing all over again. On a tennis court. For years, Summers, Geithner, and a variety of deputies have stared each other down from opposite sides of a three-foot-high net. These tennis relationships have played out on courts from Jackson Hole, Wyoming, to Davos, Switzerland, and on pretty much every flat surface in Washington, D.C. It turns out that tennis is the unofficial sport of the Obama financial team. And, if you want to understand the way its members go at it behind closed doors, it’s worth watching them go at it with tightly strung rackets.
Treasury's proposal to increase capital requirements on banks around the world won't be loved by the financial sector, but the rest of us should give it strong consideration.
China has arrived ... again. Beijing is growing confident enough in its own power and position in the world that it is increasingly and actively influencing world events. It can choose--and has chosen, in many cases--to play a helpful role in tackling shared threats. But China has also been standing its ground on disagreements with the United States.
