Follow this link to hear the interview of Simon Johnson on the bank bailout plan.

Simon Johnson helped shape the International Monetary Fund’s response to worldwide financial turmoil as the organization’s economic counselor and director of the research department, a position he held from March 2007 until August 2008.

Now a professor of entrepreneurship at MIT’s Sloan School of Management, Johnson is also the co-founder of BaselineScenario.com, a Web site that chronicles the global economic and financial crisis.

Johnson joins Fresh Air to analyze the bank bailout plan and its alternatives.

In the interview, he discusses other bailouts in history.  Some were successful and some were not. He analyzes the reasons for both success and failure.

I have previously blogged about Simon Johnson in the post Global Crisis Orientation.

In an earlier post, Musings on Mark-To-Market, I talked about the problems of this accounting rule in the current economic crisis.

RichardH commented that valuing assets is more of an art than a science.

I know this is anathema to accountants, but perhaps a company ought to be able to say, “We don’t know what our assets are worth”.  In this environment, that is probably a truer statement than putting almost any kind of misleading number on it.

Other possibilities would be to allow companies to state a range.  They might be able to say to their creditors, “if you make me sell all my assets today they are worth $100, but if you let me sell them over time and after the economy recovers they are worth $1,000.”

I remember a discussion with an ex-boss of mine who asked me to tell him how long a software-development project would take.  He then asked me if I was 95% certain about this number. I could not honestly tell him that I was.  After berating my poor abilities to manage a software project after my 40 years of experience, he asked me again how sure I was.  I told him I was 95% sure.  He then proceeded to ask me that if I was not 95% certain 5 minutes ago, how could I be so certain now?  I told him that I was just trying to give him the answer that he wanted to hear. I guess I should have waited more than 5 minutes to change my answer.

RichardH’s comment on the earlier post indicates that he has similar stories to tell from his world.

I’ll have to ask my daughter, the accountant, if there is any parallel between my experience and that of the accounting world.

Follow this link to the article in The Atlantic magazine

On the other side of the crisis, America’s economic landscape will look very different than it does today. What fate will the coming years hold for New York, Charlotte, Detroit, Las Vegas? Will the suburbs be ineffably changed? Which cities and regions can come back strong? And which will never come back at all?

Reader GarlandB has brought this article to my attention.  I haven’t had a chance to read the complete article yet. I save the link here for my own reference so I can get back to it after supper.

Now that I have competed reading the article, I see that there are a lot of ideas in there to contemplate.

One of the interesting ideas is the purported delitirious effect on the economy of too large a percentage of home ownership. This comes very near the end of the article.  The author’s arguments sound plausible to me.  I think they deserve some time to digest before deciding if they make sense or not.

What do you think?

If you want to see Cramer, CNBC, and Santelli put into perspective, you have to watch this Jon Stewart clip.

Remember back in the election of Bush vs. Kerry, how the Bush administration said that they could not imagine how Kerry’s suggested use of diplomacy could possibly work?

Follow this link to a story in the New York Times about how the Obama administration is trying to use diplomacy to repair our relation with Russia and solve the threat of Iranian nuclear weapons.

At the time of the Bush/Kerry contest, I was upset at John Kerry for failing to point out that Bush’s ridicule was not proof that diplomacy wouldn’t work.  Instead, it was proof of Bush’s lack of imagination.

The above eleven minute video is an easy to understand explanation of the crisis of credit. Follow this link to the author’s web site for an explanation of why he made the video. It also gives you a chance to support keeping the video on the web.

I am starting to think that this economic situation is starting to get serious.  I can hear you all out there saying, “Do ya think?”

Follow this link to the video of the February 27 issue of Bill Moyers Journal.

Bill Moyers talks with economist Robert Johnson, who decodes this week’s news on the bank bailout, with a hard look at the international ramifications of the plan and a discussion of why nationalization has become a flash point.

After you listen to the pessimism, remind yourself that this interview was done before this weekend’s really bad economic news about how far down AIG is falling.

Moyers kept asking what Johnson thought the worst case scenario would be.  Despite all the apocalyptic things that Johnson said in reply, I think he was still afraid to give the real answer.

See you in the breadline.  I hope they have whole wheat.

Follow this link to the story by William K. Black, Assoc. Professor, Univ. of Missouri, Kansas City; Sr. regulator during S&L debacle. He tells how the FBI warned of an “epidemic” of mortgage fraud back in September 2004. He goes on to show that the ratings agencies like Standard and Poors were complicit in keeping the fraud hidden.  Banks that packaged these mortgages and sold them as investments did not do even a minimal amount of due diligence.  Neither the banks nor the rating agencies  even requested the documentation that would have been needed to gauge the risk of the investment.

The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence.

As a novice investor, I can only say, “Live and Learn.”

Competence in the executive branch does matter.  I believe that the Obama administration has the competence, but only time will tell if I am right.  Let us hope that the voters never forget that it is nice to have a beer with a friend, but as President you want someone who is competent.

We keep hearing the story that it will take generations for our descendants to  pay off  the debt that our government is accruing to stimulate the economy.

A question has occurred to me.  At this very moment the legendary investor, Warren Buffet, is investing his money in some of the same places that our government is.  If his track record is any indication, he will become even more fabulously wealthy because of these investments.  If he wanted to leave this to his descendants, they would be taken care of for generations.

Why, then, will the same actions by our government leave the taxpayer’s descendants deeply in debt? Why aren’t we asking how Warren Buffet’s descendants are going to pay off their debt?

These are actually serious questions.  If you start thinking about answering these questions, you will learn a lot.

Republicans who claim to be masters of business, and many of them are in their private lives, know how to make money in private business, some even do it honestly.  Somehow they forget everything they know when they try to run the government.