Saturday, November 15, 2008

Hank Paulson Must Think Water Freezes at 60 Degrees

The latest news from our Treasury Secretary is that the consumer credit markets are frozen. The only problem is that Hank Paulson's idea of frozen is different than yours and mine. This guy is probably the only person lookng, in August, for the ice skating rink in New York's Central Park.

Robert Higgs explains:
Notwithstanding the many developments on the bailout front during the past six weeks, the New York Times, like other media outlets, continues to quote Wall Street insiders who report, as Alex Roever of JPMorgan Chase did recently: "You have a market that is frozen." What planet do these guys live on? It certainly is not the same one to which the Federal Reserve's data apply. I’ve been singing this song for many weeks, but I’m going to keep singing it until somebody in the news media wakes up and realizes that these "frozen credit market" tales are pure hooey. Look at the data, for crissake. By now we should all be ready to move beyond hysteria, get a grip on reality, and begin thinking about how to repeal everything the government has done during the past six weeks...

Memo to NYT: check the data on consumer loans published by the Federal Reserve System. The latest report, dated November 7, says: "Consumer credit increased at an annual rate of 1-1/4 percent in the third quarter. Revolving credit increased at an annual rate of 2-1/2 percent, and nonrevolving credit increased at an annual rate of 1/2 percent. In September, consumer credit increased at an annual rate of 3-1/4 percent." Would you describe this report as indicating a "frozen" credit market? Total consumer credit outstanding in September, $2,588 billion, exceeded the average amount outstanding in any year from 2003 to 2007, the period of the credit bubble.
My gut tells me that in Henry's mind unfreezing this non-frozen market means shipping more billions to the Robert Rubin wing of Goldman Sachs, i.e. Citigroup.


  1. I am waiting to see if the Paulson Apologists at MR (I'm talking about the commenters, not the posters) parrot this line too. When Tabarrok and Cowen were arguing about the credit crunch, the deniers would say stuff like, "I'm still getting credit card offers in my mail, wtf?"

    And then the "serious" people--who realized the bailout was necessary to avert armeggedon--would come back and say, "Give us a break, you clown, no one's talking about personal credit cards, we're talking about interbank loans, international shipping companies, etc." (Note: they might not literally be saying that in the link above, but that's only because I might be linking to the wrong iteration of the argument. People were definitely rolling their eyes when the credit-crunch-deniers brought up the credit card offers they were getting in the mail, and said that the bailout wasn't about personal credit.)

  2. Karl at Market Ticker on this: