State capital to rescue

Andrew Leonard tallies the latest round of cash infusion into Wall Street from state investors:

• Citigroup: $7.5 billion from Abu Dhabi Investment Authority and $6.88 billion from Government Investment Corp. of Singapore.
• Morgan Stanley: $5 billion from China Investment Corp.
• Merrill-Lynch: $5 Billion from Singapore's Temasek Holdings, $6.5 from Kuwait Investment Authority, $2 billion from Korean Investment Corporation
• Bear Stearns: $1 billion from China Investment Corp.
• UBS: $10 billion from the Government Investment Corp. of Singapore.

and has many insightful things to say about how excessive reliance on market forces has brought about the self-destruction of financial capitalism.

Comments

[Ali Sohail (Pakistan)]

where are the market economist now? NO state intervention? let the market play out? let the fittest survive?

[T. Aldrich]

"many insightful things to say about how excessive reliance on market forces has brought about the self-destruction of financial capitalism"?

Name one. I'd be interested in what you think they are.

[Per Kurowski]

“Excessive reliance on market forces” Ha! Excessive reliance on the capability of the credit rating agencies, those financial Kommissars appointed by the regulators to show the way away from risks

[robertdfeinman]

The message that I take away from these activities is that the financial firms that are "too big to fail" will not have any trouble finding the capital they need to ride out the storm.

The writedowns that they are taking reflect actions in the past. What's more important is what they will be doing in the future.

I'm betting that they will recover, perhaps after a year of weak activity, and thus make attractive choices for long-range investors.

The only danger to investors is for a financial firm to fail and this now seems unlikely for any of the major players. Wall Street wants to see growth every quarter, but long-term investors can afford to be patient.

[Justin Rietz]

I disagree as to "excessive reliance on market forces.” Let's look at the root of the problem: unnatural low interest rates set by the Federal Reserve under Greenspan, and as PK points out, the quasi-government status granted to credit agencies. Without the original Fed intervention under Greenspan, the real estate bubble would not have occurred, or at least would have been significantly smaller.

Dani, I would be interested in your opinion regarding the effectiveness of the Federal Reserve and its role in the economy, or even if you would be supportive of abolishing the Fed and letting the market set interest rates.

[$9,000,000,000 Write Off]

Who's to say that the $30,500,000,000 listed wouldn't have been similarly invested by those country's private citizens had their government not confiscated it?

Or that the absence of such infusion would have meant anything besides a lower share price, some layoffs and other benign restructuring?

Maybe, maybe not, but 5 financial decisions are a slim dataset for any proposition.

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