In March, the World Bank said the global economy would see its deepest contraction on record, 1.7%. Well, the World Bank has changed its mind. Today, the group said things will be even worse, a 2.9% drop. That’s one reason Wall Street is in sell-off mode. Some other stuff:
Law professor David Skeel writes in the Weekly Standard that instead of institutionalizing bailouts, we should give bankruptcy a chance for the “too big to fail” financial companies. He says Lehman’s collapse was so disastrous because the government made it look like it would bail out the company:
Lehman, its suitor Barclays, and everyone else assumed the government was standing by with buckets of money. But regulators played bait and switch, deciding at the last minute not to provide bailout funds after all. Lehman’s failure to prepare, and the way it was dumped into bankruptcy, were the problems. The bankruptcy itself has gone remarkably smoothly.
If Bear had been left to file for bankruptcy back in March, the managers and investors of Lehman and AIG surely would have acted differently in the weeks before their failures. The prospect of bankruptcy would have given them a very different perspective on the implications of their financial difficulties. At the least, they would have gotten their books in order and started looking for buyers for their businesses much earlier.
Along similar lines, John Tamny of Real Clear Markets, writes in Forbes that a reforestation of the financial industry would’ve occurred naturally:
While Ford Motor Co. can trace its beginnings to car manufacturing, Quicken to tax software and E*TRADE Financial to low-cost stock trading, all are presently significant players in the business of lending. More broadly, retail behemoth Wal-Mart would have been in banking years ago if it weren’t for regulations meant to keep it out, while leveraged-buyout giants of the Blackstone Group variety are dying to pick up insolvent financial institutions on the cheap.
In that sense, the true contributor to our economic downturn wasn’t so much the failure of banks, but instead a bipartisan failure within Washington to let market forces prevail whereby finance substitutes would have entered a marketplace badly served by various dead banks walking. Put more simply, the unraveling of major financial institutions is not what presently ails us, but an unwillingness to allow them to die so that they could be replaced by healthy substitutes is.
NPR had a good story on Morning Edition about health insurers rescinding benefits because of technicalities. There was a Congressional hearing on this recently:
The rescissions based on omissions or immaterial conditions incensed many lawmakers.
“I think it’s shocking, it’s inexcusable. It’s a system that we have in place and we’ve got to stop,” Energy and Commerce Committee Chairman Henry Waxman (D-CA) said at the hearing.
From the other side of the aisle, Rep. Joe Barton (R-TX) was also appalled.
“Doesn’t it bother you to do this?” he asked Don Hamm, CEO of Assurant Health, who appeared with the CEOs of UnitedHealth’s Golden Rule Insurance Co. and WellPoint’s Consumer Business.
Yahoo has a list of several types of jobs available because of the stimulus plan. Among them — civil engineer, solar panel installer and yes, loan officer:
Just signed into law in May, legislation entitled Making Home Affordable provides federal incentives for banks to help up to 9 million distressed homeowners renegotiate their loans. Because each mortgage agreement and piece of property is unique, the work is time-consuming — a loan officer must sit down with each homeowner individually.
Consumerist.com has sent its congratulatory letter to AIG for winning its Worst Company in America award, the Golden Poo:
In anointing you supreme victor, Consumerist readers cited such achievements of yours as “wrecking the whole economy,” “costing the American tax payer untold billions,” and noted both your “greed” and “chutzpah.” Considering how influential AIG has been in the events of the past year, I can think of no one more deserving than you to receive our prestigious Worst Company in America Award, the Golden Poo. Please consider displaying it in your booth at your next secret tradeshow.
But my funny of the day award goes to the Onion:
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.