Subscribe to this blog's feedThe FT reports that Bank of America, JC Flowers and the Chinese sovereign wealth fund CIC are preparing to buy Lehman "at fire sale prices", while the Treasury stands well back. No bailout this time...
(Fire sale is about right - according to this, Lehman's staff bonus pool is now worth more than the bank itself.)
Seems like a good opportunity to refer to this paper, which is by Brad Setser (who looks like an optimist only because he used to blog next to Nouriel Roubini) and looks at the effect of being a debtor nation:
the U.S. deficit matters for economic and strategic reasons alike. The United States may have more to lose than its creditors if they sell American assets or stop accumulating them at their current pace. This gives creditors potential leverage over U.S. policy. Setser also argues that indebtedness limits America’s ability to influence other countries’ policies, for example through sanctions and lending arrangements.
There's also this paper, on the ultimate effects of the mortgage crisis:
we estimate that the crisis could lower real GDP growth in 2008 and 2009 by an average of 1.8 percentage points per year. This assumes that the GSEs continue to expand their mortgage book of business aggressively, an outcome that has become more likely following the measures announced by the U.S. Treasury on September 7, 2008. If instead the GSEs stopped expanding, the estimated GDP hit would rise to 3.2 points per year.
