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CCTV News: US Economy, Lehman Collapse, and EU Bank Taxes

September 3, 2010

On Thursday, I was on CCTV News BizAsia.  The first interview segment focused on interpreting the latest US economic figures.  Manufacturing was up, which caused the stock market to rally as investors switched out of safe-haven bonds.  But confidence that a “double-dip” recession could be avoided were tempered by reports of private sector job losses and mixed signals on housing (mortgage applications are slightly up, while construction spending is slightly down).  Indications are that the worst may not come to pass, but the recovery is still fragile, and the Fed is clearly more inclined to further ease than to start tightening.

In the second clip, I give my take on this week’s congressional hearings on the 2008 collapse of Lehman Brothers, which included testimony by former Lehman CEO Dick Fuld.  In it, I explain why accusations that US officials stood by and allowed Lehman to fail for political reasons don’t hold water.  In fact, they did to try rescue Lehman, and nearly succeeded, by were constrained by the criticisms and false expectations created by the earlier rescue they coordinated for Bear Stearns, as well as the short-sightedness of British regulators who cut the rug out from under an 11th-hour bid by Barclays.  As for Fuld, he can complain about the government not bailing out his firm, but he can’t blame them for getting it into a condition where it needed to be bailed out.  Fuld had all summer to find a partner to save Lehman, as Treasury and the Fed were pushing him to do, but that would have meant sacrificing his own position, so he tried to ride it out alone until it was too late.

Here’s another BizAsia link from last week, discussing Germany’s new proposed bank tax.  I talk about the reasons for the tax, how it would work, and some of the potential drawbacks and obstacles, as well as the likelihood that other EU and G-20 countries (including the US) will follow suit with bank taxes of their own.

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