from Mish's Economic Trend Analysis blog:
Elizabeth Warren On The Policy Response
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Please listen to that sobering interview, in entirety. It is about 9 minutes long. Elizabeth Warren rips PPIP (the public-private investment plan) to shreds, and questions the policy responses that have still left toxic assets on the balance sheets of banks.
Warren: ".... In addition to what we've got with the toxic assets, we've got a real problem coming on commercial mortgages.... looking ahead to 2010, 2011, 2012 we are potentially looking at 50-60% default rates. This is a very significant problem concentrated with intermediate and smaller banks"
My favorite exchange starts just after the 7 minute mark.
MSNBC: In hindsight was Paulson right? If Congress did not write that $700 billion check would banks have collapsed?
Warren: I have to say I think there would have been some real pain. There are some businesses today that are alive that would have been wiped out. However, I am just not convinced at all that we would have gone into a death spiral"
MSNBC: With the facts he knew at the time, was it the right call?
Warren: (struggling to be polite) "You know, let me say it this way. The question about whether or not the world as we know it has ended, depends on what you think the world is as we know it. If you think the world as we know it, are a handful of huge financial institutions, the dinosaurs that roamed the earth, then you're right. They are not going to exist without huge infusions of government money. On the other hand if what you really believe is that our economy and our world is 115 million American households you start to see it very differently. And you say, you know if the dinosaurs are gone there are still a lot of stuff to be done.
High Praise For Elizabeth Warren
I have high praise for Warren. It takes a lot of courage to say what she did on the record. Moreover, I am certain she is correct about what she hints the real world is: American households and a large consortium of small to mid-sized banks as opposed to a few dinosaurs that ought to be extinct.
Bernanke Saved The Dinosaurs
Bernanke did not "save the world". All Bernanke did was prolong the lives of a few ailing dinosaurs at great expense to US taxpayers.
Elizabeth Warren, not Bernanke should have given a speech at Jackson Hole.
