Author Archive | Eric Posner

Let’s see, if markets around the world are capitalized at about $50 trillion and they declined, say, 5 percent on average as a result of Congress’s vote, then about $2.5 trillion of wealth vanished (okay, maybe a bit lower, according to Jim’s account of Asian markets; the rest of the world looks less good). For […]

Here. A quick skim reveals no surprises: more elaborate reporting and oversight requirements but not clear they have teeth; some limitations on (equitable) judicial review that I don’t think were present before; the strange Republican insurance plan (discretionary); and various bells and whistles. Update: This version is the latest. Update #2: David Zaring’s discussion of […]

Here’s a recap. Paulson sought to give Treasury the power to buy mortgage-related assets. A power grab!, said the critics. So congressional Democrats sought to give Treasury the power to buy mortgage-related assets, non-mortgage-related assets, and equity interests, and to regulate executive pay. Socialism!, said the congressional Republicans. So the final bill gives Treasury the […]

Sure, they all can tell us that companies should not be routinely bailed out but in situations of financial contagion bailouts may be sensible, but do they really know whether such a situation exists today or not? Or how to respond? I was skeptical about whether they knew or not, but didn

What is the difference between the two bills? Broadly, we can identify two dimensions: technocratic and distributional. On the technocratic side, Dodd supporters argue that the financial crisis will be resolved more cheaply if (for example) the government demands equity warrants or must submit to judicial review. Maybe, maybe not. The main difference, it seems […]

Commentators have criticized the Paulson bill for claiming too much discretionary authority for the Bush administration, echoing a well-known complaint about Congress

Section 11 of the Dodd bill seeks to minimize foreclosures by allowing bankruptcy judges to approve Chapter 13 bankruptcy plans that adjust the terms of residential mortgages in the debtor

You might think so from reading the Dodd bill and the news accounts (including this very helpful discussion by Steven Davidoff): 1. Under the Paulson bill, Treasury will have the power to purchase mortgage-related assets. Under the Dodd bill, Treasury will have the power to purchase these assets and

Ilya, citing a column by Steven Landsburg, asks why a bailout is necessary. In Landsburg

There are two reasons to hate the Bailout bill. One is that it does the wrong thing; the other is that it gives the Treasury Department too much discretion. One internally consistent view is that nothing should be done. Another view, internally inconsistent but much more popular, is that the Treasury should be given even […]

1. Why do people like me and Sandy Levinson keep talking about the Nazi philosopher Carl Schmitt? Schmitt was skeptical that a parliamentary democracy can handle crises: it can only role over and let the executive act. You can read Levinson here (marred only by the pervasive tone of indignation: what exactly does he (realistically) […]

Whether the Fed (and/or the Treasury) acted unlawfully depends on whether the transaction with AIG falls within the statute that authorizes the Fed to make loans to non-banks during emergencies. It is clear that the transaction mixes elements of debt and equity. The Fed probably will get the residual value of AIG

Whether or not the Fed has the authority to buy/lend to AIG, the story does not end there. In order to lend/buy, the Fed needs to come up with $85 billion, which is conveniently being supplied by the Treasury Department, which is in turn borrowing it from whoever will lend money to the U.S. government, […]

1. It really is a loan, not a purchase. 2. It

True, the Fed statute says that loans can be issued with conditions. As a commenter asks, what loan doesn