Saturday, March 29, 2008

The Art of the Deal

Sometimes you eat the bear, sometimes the bear eats you.

blackhedd (now, there's a nic for you) over at RedState has put up an excellent series of articles on recent events in the US financial markets. If you loved Chaos Trade , Pay Attention to the Signs and Bear Stearns Meltdown you will dig: More on the Federal Reserve's St. Patrick's Day Massacre. The comments are illuminating and entertaining, as well. Definitely click-worthy.

Here's a sampling to get you started:

I now have much more information on what this deal is all about. I guessed quite wrong about the deal structure. The $30 billion loan is not a term repo as I originally thought. Nor is it likely to generate monetary losses for taxpayers. (In fact, the opposite is true.)

But it is something bold and different that's worth understanding. In fact, it's a major milestone event in the monetary and financial history of the United States.

Before I launch into this, let me set the context by reminding you why all this financial mumbo-jumbo is important: it's because of politics. Even before the full effects of the credit crisis make themselves felt, we're already deeply into a paroxysm of "the sky is falling! What is the government going to do about it?" I'll be posting as much as I can on this subject in the coming days and weeks, because there is at least as much danger to the real economy from a mad dash toward new regulations and Federal involvement, as there is from the financial-system disorders themselves.