Monday, Apr 06, 2009
Roger Altman: former deputy Treasury secretary
FT: Why this will not be a normal cyclical recovery
The implications for US policy include a likely second round of stimulus, much more federal capital for the banking system and stunning budget deficits.
Households felt wealthier, despite pressure on incomes, because home and financial asset values were rising. Now that wealth effect has reversed with a vengeance.
Funds from the Troubled Asset Relief Program are only replacing lost capital, not increasing it. When might they end? With key categories of toxic assets still losing value, the answer is: not soon. The scale of lending needed to support a normal cyclical recovery will not materialise.
Despite public opposition, substantially more federal capital will be required for banks.
Posted by devo @ 10:18 PM (281 views) Add Comment
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