To me, this looks like more accounting fixups have been done, and another turd has been identified. This crisis is all about accounting - bad accounting - including bad risk management. This kind of crazy bad news is going to continue until all of the bad accounting has been updated with good accounting.
The WP adds a little historical gem by pointing out that Citi's origins can be traced back to a firm called First National City Bank that, in the 1920s, repackaged and sold bad loans from Latin America and billed them as safe securities. After the scheme collapsed, it became Citibank. Decades later, repackaging bad loans as safe securities is at least part of the reason why Citigroup is suffering so much heartache. Curious about how Citigroup got into the predicament it's in today? If so, be sure to read yesterday's detailed NYT piece that explains how the company went from being worth $244 billion two years ago to $20.5 billion today. The story is particularly interesting, considering that Robert Rubin, Treasury secretary under President Clinton and an economic adviser in Obama's transition team, plays a starring role in the saga.
The article goes on to say that
It shouldn't surprise anyone that if you give someone - anyone - the power to print money - that eventually they will do so, and now - Surprise! - Obama's team is stepping up to the plate for their swing at printing money.
Speaking of Rubin, the NYT takes a look at how Obama is creating "a virtual Rubin constellation" in his economic team. Obama's three top economic advisers "are past protégés" of Rubin, who also has ties to other members of the president-elect's transition team. But even though the three advisers once shared Rubin's formula of favoring balanced budgets, free trade, and financial deregulation that was so popular in the 1990s, they all recognize that times have changed. They're now following Obama as he promises to increase regulation and plans to take the country deeper into debt.
I don't know of any way to explain to "Joe Sixpack" or even "Smart Republican or Democrat" that printing money is bad. The best I've been able to come up with is that printing extra money is a form of central planning - and we all know that central planning brought down the Soviet Union. There's no point in calling it Socialism or Marxism or Modified Capitalism - these terms don't have any broad meaning anymore.
Every time the Congress passes a tax plan they are participating in the process of central planning. Each line in that bill is either (1) a handout (duh); or (2) an attempt to encourage social behavior along a certain path. In our country, nobody is forced to work at a certain job, as was true in the Soviet Union; but through "tax policy" - which is just central planning - people are encouraged to buy a certain type of car, or work in a certain location, or sign up for a certain kind of insurance, or buy a house, or have kids, and so on.
Successful CEOs delegate - they can't be involved in every decision. And yet the Congress - by definition a committee, so that puts them a step behind a CEO right there - got involved with the price of toy wooden arrows for children.
I don't see how central planning is a good thing for our country. It's beyond my capabilities to explain why a fixed currency is a good thing. The best I can do is point out that without a fixed currency the government - and the government consists of people, so in other words, "certain people" - have the power to print extra money. And they will work hard to convince you that printing extra money is in your best interest even though it is not.
I also don't see (if one has to choose the Central Planners), how choosing the guys that screwed up the economy most recently by advocating for increased and dangerous leverage should be the guys in charge of bailing it out.
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