Research Zeitgeist: China and The Perils of Paulson
Looks like China grabbed the Olympic torch this summer and is bringing it to Washington DC to claim its place at the head G-table. Though it is uncertain what, if anything, the G-20 summit will accomplish, one thing is clear: China is striking a claim to a major role in global economic and financial policy. Its aggressive stimulus program makes US policy actions look half-baked. What once looked like bold moves by Paulson and Bernanke are now looking increasingly tentative and malleable, just what a market looking for clarity and certainty does not want. It all goes to show that China ‘s experience at dealing with toxic products is paying off, and that China is much better at the Socialism thing than recently converted free market groupies.
Certainly, you would never see senior Chinese officials arguing publicly over who has the best mortgage relief plan. Treasury and the FDIC’s Sheila Bair had better sort this out in hurry: CreditSights cites an alarming increases in subprime mortgage delinquencies as unemployment rises and the stimulus rebate checks are long since spent.
Whatever flaws the TARP may have, they are magnified by a failure to communicate. Ever since the botched rollout of the “bank bailout” plan Paulson has been on the back foot, alternately pleading for support and protesting that people just don’t understand. Maybe he should send everybody a copy of Research Primer: Understanding the Credit Crisis.
President-elect Barack Obama, meanwhile, is keeping a safe distance from the perils of Paulson, but will eventually have to nail his colors to the mast, to thoroughly mix metaphors. His healthcare agenda came under scrutiny this week with several reports on Research Recap garnering attention. This includes Moody’s handicapping of the winners and losers under the plan. A PricewaterhouseCoopers analysis came to the shocking conclusion that the plan might turn out to be more expensive and deliver fewer savings than claimed. In addition, Standard & Poors noted that the weak economy is posing increased risks for health insurers.
And as if things weren’t bad enough already for real estate, the mounting problems of retailers such as Circuit City are adding to their woes, as noted in CMBS Outlook Uncertain as U.S. Retail Sector Nosedives.
Research Recap Quote of The Week:
The ongoing adjustment in housing markets still has a long way to go. – OECD
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