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What Paulson Meant to Say
Tweet Share on Facebook September 17, 2008 Comment (6)If anybody knows how much worse the meltdown of 2008 is likely to get, it's Treasury Secretary Henry Paulson. But he's not telling.
Paulson held a press conference in the midst of momentous developments involving Lehman Brothers, AIG, and Merrill Lynch to say everything would be OK. In a few years. If the market cooperates. And the government doesn't run out of money. And politicians don't make things worse. And oh, by the way, don't blame me.
In fact, if you read Paulson's words closely, he wasn't that reassuring at all. Here's what Paulson said, along with some guesses about what he might have said if the global financial markets weren't scrutinizing every syllable:
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The Upsides of Market Turmoil
Tweet Share on Facebook September 16, 2008 Comment (3)Funny thing about Wall Street: Good news and bad news are often the same thing.
For every seller there's a buyer, and when one person is losing money, somebody else is usually making it. Even the most dismal economic news can send markets higher, if it means the Fed will cut rates or some other relief is imminent.
The worst market plunge since the 9-11 attacks is hardly cause for relief, and the collapse of storied companies like Lehman Brothers and AIG makes it seem like any company could tumble. But there's some good news mixed in with all the gloom. You might need a microscope to see it, but it's worth taking a look:
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Econoquiz: How High Are U.S. Taxes?
Tweet Share on Facebook September 12, 2008 Comment (5)Name a tax, and chances are either Barack Obama or John McCain wants to change it. Obama wants to cut income taxes on lower earners, raise taxes on others, and give Americans an energy rebate funded by a new windfall tax on oil companies. McCain wants to cut the corporate tax rate from 35 percent to 25 percent, and extend the 2001 Bush tax cuts, which lowered rates on higher earners and are set to expire in 2010.
Good or bad? For many Americans, it's hard to know what to think of these various proposals, since the U.S. tax structure is so arcane. Here's a quiz to test your tax IQ:
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Bailout Fever Stops With Lehman
Tweet Share on Facebook September 11, 2008 Comment (2)When there's a bear market, Wall Street investors go hunting for the elusive bottom—the point at which bad times stop and things turn around. Investors sniffing around the flailing Lehman Brothers seem to seeking a bottom, too. This time, they're testing whether the government has the stomach for one more big banking bailout.
The likely answer: No way. That's because Lehman's collapse seems much more contained than other bank meltdowns that threatened consumers directly. The Federal Reserve ponied up $29 billion this spring to help salvage a rump Bear Stearns because a run on the bank's arcane mortgage-backed securities could quickly have spread to other banks, paralyzing the housing market. The case for last week's announced rescue of Fannie Mae and Freddie Mac was even stronger: The two firms directly support nearly 75 percent of all mortgages being written today.
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Year of the Bailout
Tweet Share on Facebook September 9, 2008 Comment (7)Want a federal bailout? Get in line.
Now that the Treasury Department has finally announced its rescue of mortgage giants Fannie Mae and Freddie Mac—at a cost of up to $100 billion each—isn't it time to start tallying up all this largesse? A hundred billion here, a hundred billion there, maybe it doesn't seem like much at first. But before you know it, you've drained the treasury of the world's richest country. And besides, more rescues seem to be coming. Here's a tally of the bailouts so far:
The stimulus package. Maximum taxpayer cost: $150 billion
What taxpayers got: Free money, up to $1,200 from the government per household, to spend as they wish. Early research shows most recipients have used the money to pay down debts or boost their savings. Good for them, but bad for the economy, which benefits most in the short-term from spending, not saving. -
The Mixed Blessings of $100 Oil
Tweet Share on Facebook September 8, 2008 Comment (14)There sure was a frenzy when oil prices surged close to $150 per barrel over the summer and gas prices crested at $4 per gallon. John McCain called for suspending the federal gas tax. Car buyers freaked out and virtually stopped buying big SUVs. "Energy policy"—usually a sleeper issue—became front-page news.
It's a lot quieter now that oil prices are drifting back down toward $100 per barrel and maybe lower. Cheaper oil will certainly give consumers a breather and ease inflation worries. Yet the dramatic fall in oil prices could have unforeseen—and unfortunate—consequences. Here are a few:
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McCain's Economic Plan: Where's the Rest of It?
Tweet Share on Facebook September 5, 2008 Comment (25)You know those times when the printer runs out of paper midway through a job, but you don't realize it? You pick up the document and start reading, then wonder where the rest of it went.
That's what John McCain's economic plan feels like. The Republican presidential nominee has outlined plenty of principles and a few specific ideas, like cutting the corporate tax rate, reducing energy costs, and balancing the federal budget. But in his acceptance speech, McCain also pledged to help Americans who "struggle to buy groceries, fill your gas tank, and make your mortgage payment." How? Your guess is as good as mine. Some of the biggest gaps in McCain's plan:
