Tearing Into the Fed and Treasury Plans

Barrons ^ | 10/27/08 | JACK WILLOUGHBY

[Grim]

Pre-eminent economist Anna Schwartz thinks the shortcomings of the U.S. bailout plan will only lead to further problems in the credit market

"The chief problem is that the Treasury can responsibly provide capital only to solvent institutions, but should not recapitalize insolvent institutions. The current program offers no way of determining who is solvent and who is insolvent," says monetary authority Anna Schwartz. When it comes to the unprecedented lending by the Federal Reserve Bank under Chairman Ben Bernanke and new and untested programs from the Treasury and its head, Henry Paulson, she doesn't like what she sees.

Her prescription: Stop managing by press release. The federal government needs to turn off the liquidity spigot and quarantine bad assets. Ad hoc program announcements have only undermined faith in the U.S. financial system, in her view, and, if continued, could raise fears that ultimately threaten the U.S. financial system. Here are more of her provocative thoughts on the current crisis.

[Grim]

Anna Schwartz is Milton Friedman's spouse and co-author.

[aWolverine]

Brilliant advice. Too late. Will be ignored.

[bcsco]

Bookmark for reference

[Sioux-san]

Considering that Paulsen is now apologizing to the World for the royal screw up here in America, I can’t but wonder whether this is all a big scheme to ensure that we crash & burn. This guy is acting like a crazy man- and he is in charge??????

[HappyinAZ]

Great article...thank you so much for posting it.

[Citizen Tom Paine]

Private gain but socialized losses. Start a giant Ponzi scheme, grow it large enough, then when it starts to disintegrate, the US Government backed by the taxpayers will bail you out. This is the “New Capitalism”. Our Grandchildren will curse our names, if they live that long.

[bert]

She confuses an economic problem with a poitical problem The politicos will attempt a solution

[aWolverine]

Considering that Paulsen is now apologizing to the World for the royal screw up here in America, I can’t but wonder whether this is all a big scheme to ensure that we crash & burn. This guy is acting like a crazy man- and he is in charge??????

The goal is obvious to anyone without an MBA: Crash the US dollar as the world reserve currency. I don't know what Paulson has been promised or threatened with, but by golly, he is willing to kill America to do just that.

[AAABEST]

I was watching the Paulson speech today on Bloomberg. They run a live DOW ticker at the same time. I’ve found that the market drops around 1 percentage point for every sentence this goon utters in public.

What a clown show this has become.

[Grim]

She confuses an economic problem with a poitical problem The politicos will attempt a solution

Anna Schwartz is not the one who's confused here.

[riverdawg]

Anna Schwartz was not Milton Friedman’s spouse; Rose Friedman was his spouse. Schwartz was a coauthor of his, however.

[Grim]

Anna Schwartz was not Milton Friedman’s spouse; Rose Friedman was his spouse.

Oops. My bad.

[Sioux-san]

It feels like we’re (the USA) being blackmailed by someone who can make good on the threat (China? Soros and friend?), hence the urgency. But, then it’s been a month since we were told the sky was falling. Gas is $1.99 today, so the sheep are happy here in Battle Creek (I’m one of the woolies ;o)