With news that Goldman Sachs and Morgan Stanley are ending the era of investment banking as of today, I could not help but wonder if today's date 9/22 will become a shorthand symbol as did 9/11.
The credit crisis is ongoing, but a new and unprecedented government bailout known as the Paulson Plan is being worked out in Congress. Every hour that ticks by reveals the typcial nasty partisan differences, introduces add-ons, but also allows experts to raise questions about deficiencies and unexplored alternatives.
I remain a skeptic for reasons that don't merit too much attention at a time when renowned financial experts are publishing very valuable insights. Here are four worth your time:
- Jim Hamilton, a seer if there ever was one
- Bob Litan, my colleague and a towering expert on finance
- Paul Krugman, in a welcome essay showing his wit and wisdom, rather than rancor
- Luigi Zingales, UofC professor who explains "Why Paulson is Wrong."
As for me, I would happily repeat what I have told all my econ students and countless people in casual conversation the simplest explanation for confidence: "There will never be another Great Depression." It can't happen for a handful of reasons, but perhaps the most important lesson is that the Great Depression resulted not from Wall Street's collapse, but from numerous wrong-headed responses to the crisis that unfolded over many, many years. At a minimum, the Fed will not fail to provide more liquidity, not less (as it did during the early 1930s).
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