Forgive me, but we are going to be a bit lean on posts tonight. I had too much to drink with someone who is terribly plugged in (security clearances AND knows tons of people in academia and the officialdom personally, both here and overseas).
Unfortunately, I can’t use many of the specifics he conveyed, but he is a very upbeat sort by temperament but also has been studying the banking/credit mess. He sees us going down the Japan path. Banks will not be technically bankrupt, but will have so many bad assets on their balance sheets, and will have taken hits to their equity bases, that 18 months from now they will be unable to make new loans. They will be quasi nationalized. BTW he said this in a completely evenhanded fashion, as if he was giving a weather report.
This, mind you, comes from someone who has written frequently for the American Enterprise Institute and tells me the Treasury and the Fed are working on this scenario now. This is far more dire than any forecast either yours truly, a constitutional skeptic, or even uberbears like Nouriel Roubini, have been putting forward.
Other juicy news:
Housing Futures Suggest Recovery Won’t Be Seen Until 2011 Housing Wire. This shouldn’t be a surprise; housing recessions generally last 15 quarters.
Blair takes advisory position at JPMorgan Financial Times. I am sorry, I am an old fart, but this is reprehensible. Isn’t making speeches for hundreds of thousands of pounds and book deals (bad) enough? Formal private sector jobs, even advisory roles, by top government officials, should be prohibited for at least two years (four would be better). Any shorter timeframe creates conflicts of interests.