Weekly Wrap: Signs that we’re OK
TEXT OF INTERVIEW
Ryssdal: As we mentioned up top, job losses continue to be the hallmark of this recession. And today’s numbers were less than hopeful. But in fairness there have been a couple of signs that things might — and we stress, might, here — be getting less bad. To help us do our Weekly Wrap of Wall Street and beyond, we turn once again to John Carney from Clusterstock.com and Megan McArdle. She’s an editor at The Atlantic’s Business Channel. Hi guys. How are you?
Megan McArdle: Pretty good.
John Carney: I’m great!
Ryssdal: So listen, John, let me go to you first and sort of raise the proposition that despite today’s job numbers, maybe things aren’t so bad out there. What do you think?
Carney: It’s looking pretty good today. And this whole week we’ve had a bunch of news that isn’t quite good, but not catastrophic, which is a big change. And the markets have responded very well to that.
Ryssdal: Have we decided to fool ourselves, though, Megan, that believing that maybe the bottom is nigh?
McArdle: I think if you look at the standard length of time after a big recession, especially a recession that starts with a financial crisis, it doesn’t really look very likely that we’ve bottomed. It seems more likely that we’ve got about a year to go.
Ryssdal: Wait, wait. A year to go to the bottom?
McArdle: Yeah.
Ryssdal: Really?
McArdle: Yeah. If you look at charts showing what happens to, say stock prices after the start of a recession, how many months into the recession you are, it’s very unlikely that we’ve bottomed. It would be historically one of the fastest bottoms ever. So I’m skeptical.
Ryssdal: Well, let’s step back for a minute though and look at the bigger picture. We had the president getting very serious with the car companies earlier this week. We had the mark-to-market rule yesterday. We had the G20 meeting where everybody seems to agree that there’s a big problem. I mean, Megan, doesn’t that tell you, I don’t know, something?
McArdle: Well it tells you something, but so far the president has talked tough with the auto companies, and I don’t want to be too pessimistic because talking tough is better than weaseling. But that said, he actually hasn’t pushed an automaker into bankruptcy. What the government is currently trying to do is protect a lot of UAW jobs, and that’s at odds with fixing the companies. It’s not merely a question of the wages and benefits that are paid to the UAW. It’s the fact that UAW fiecely resists having plants closed, for obvious reasons. Close a plant, lose jobs. And all of that is going to be incredibly painful, and it’s going to devastate Michigan. And is seems tough to picture Obama actually doing that in the face of the inevitable hit to GDP that we would take, because it is a big part of GDP.
Ryssdal: John, I don’t want to be the guy who’s incessantly looking for the silver lining here, but there has to be some upside? I mean, people are getting sick and tired of being sick and tired, you know what I mean.
Carney: There’s little signs of hope everywhere. Even in Obama’s tough talk with the car companies, there’s stories out today that he got pretty tough with the bankers as well when he had his summit with them. That he told them, look guys, you’ve got to stop trying to pull the same lines about having to pay up people large bonuses, that’s not going to fly. So, you know, maybe he’s finding his spine, and that’s a good sign because–
McArdle: I would differ with John in saying that I think it’s nice that he’s talking tough to Wall Street about bonuses, but this is fundamentally not a very interesting issue. It really doesn’t matter how much these guys get paid, it’s totally irrelevant to whether or not we fix the banking system.
Ryssdal: Alright. Well then, what is the answer? What do you want him to be doing?
McArdle: Well, what I would like to see is some movement forward on these plans to buy assets. I’d like to find out if anyone’s going to invest in these other than PIMCO.
Ryssdal: The big bond fund.
McArdle: The big bond, yeah, the big bond fund. And so, you know, I’m not sure that I am in a position to dictate exactly what I would like to see Treasury doing. What I would like to see is more, sort of, steady motion forward, and more reassurance that what they’re doing is actually having some buy-in from Wall Street and from Main Street. And that’s not clear yet.
Ryssdal: Yeah. John, would you settle for that? Steady movement forward?
Carney: Anything besides movement backward at this point. You know, if we could just stand still, you know. It just feels like we’re slipping down hill a little bit every day. And buying toxic asset plans is another one of these things. We know PIMCO said they’d buy it, but we’re hearing from more and more people. Just yesterday Bridgewater Associates said they initially were planning on buying in on it, and they are now officially backing out. That’s backward movement and, you know, I’d like to see a little bit less of that.
Ryssdal: John Carney, from Clusterstock.com. Megan McArdle’s the senior editor at The Atlantic’s Business Channel. Thanks again guys.
McArdle: Thanks.
Carney: Thank you.
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