Posted by: Dirk | May 6, 2009

Crisis Issues

Some articles in the FT I wanted to comment on have been sitting in the draft section for almost too long. Let me just briefly comment.

BofA ‘threatened’ over Merrill deal: Andrew Cuomo, New York’s top law officer, quoted Mr Lewis as saying that in December, when mounting losses at Merrill caused him to reconsider the acquisition, Hank Paulson, then US Treasury secretary, warned that a failed deal could destabilise the financial system.

At that time, US officials feared that the failure of another Wall Street investment bank could cause panic among investors. The earlier collapse of Lehman Brothers had sent shockwaves through financial markets.

In a deposition in February, Mr Lewis said that Mr Paulson had told him that “we feel so strongly that we would remove the board and management” of BofA if it pulled out of the deal. Mr Cuomo’s letter described Mr Paulson’s remarks as a “threat”.

Wow. This further blurs the line between supposedly free enterprise and government-sponsored firms.

We must keep at the process of repair and reform:In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening. Conditions in some financial markets have improved and the decline in world trade may be abating. However, real progress requires time, and significant risks and challenges remain. Thus, it is critical that we continue to act together to strengthen the basis for global recovery. We have an agreed strategy and a common imperative to implement our strategy with energy and dedication to our shared objectives.

This article was written by Timothy Geithner. It shows how dowmocracy works. Government has to do everything to increase the Dow Jones index. If it does, government is good. If not, not. George W. Bush did that, and it drove us into the worst economic slump since WWII. Apparently, the new Obama administration plays the same game. Also journalists fall for it. If the stock market is up, the crisis must be almost over. They assume that investors are rational and intelligent. We have seen that this is not so, but it’s hard to quit a habit. However, dowmocracy is a move away from democracy as envisioned by Abraham Lincoln in his Gettysburg address during the US Civil War:

It is rather for us to be here dedicated to the great task remaining before us—that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion—that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.

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Responses

  1. […] More than a year ago I used the term dowmocracy, defining it as follows: Government has to do everything to increase the […]


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