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December 2, 2014

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Dec. 18, 2009 / 1 Teves 5770

Were the banks that sick to begin with?

By Robert Robb


http://www.JewishWorldReview.com | The accepted narrative is that, after Lehman Brothers filed for bankruptcy in September 2008, the American financial system teetered on complete collapse. Only massive federal intervention prevented it from imploding.


This narrative is the premise underlying extensive regulatory reform for American financial institutions and markets, such as recently passed the House of Representatives.


But now that, a little more than a year later, all the major financial institutions have or are in the process of repaying the capital given to them under the Troubled Asset Relief Program, it's worth kicking the tires a bit on the accepted narrative.


The Lehman bankruptcy supposedly froze credit markets. The commercial paper market was roiled for awhile when the assets of one money market fund, with exposure to Lehman, dipped below par. And short-term interbank lending rates did shoot up for awhile.


Stanford economist John Taylor has convincingly established that the latter wasn't a result of the Lehman bankruptcy. Instead he attributes it to all the uncertainty about the federal government's response to the Lehman bankruptcy, which did set off a deep stock market decline and panic in Washington.


In any event, there's little evidence of an overall credit crunch in the numbers. Total business debt outstanding went up in the two quarters following Lehman's bankruptcy. Even today, it exceeds what it was in the quarter preceding the bankruptcy.

Letter from JWR publisher


The first decision of the federal government following the Lehman bankruptcy was to bail out AIG. AIG had liquidity problems because it had insured various collateralized debt obligations that were losing market value. The counterparties were mostly large financial institutions. The losses to which AIG's illiquidity exposed them were relatively minor compared to their overall operations. Nevertheless, the federal government made them whole to keep AIG from going bankrupt.


AIG had pension and commercial paper obligations about which federal regulators worried. But AIG was not a bank, wasn't a big player in financial markets, and was subject to protected reserve requirements in its insurance products. Hard to see a limited AIG bankruptcy as something that would have toppled the entire financial structure of the United States.


And then there was TARP. The first TARP capital infusions were made in mid-October 2008. At the time, Treasury Secretary Henry Paulson said that the big banks accepting them were healthy. They were accepting the infusions to make it less of a stigma for financial institutions that really needed the help. There are indications that federal officials didn't really believe that was the case, that they believed that these large institutions were in trouble themselves.


Either way, this is deeply disturbing. Either federal officials forced healthy banks to take taxpayer money to obscure from investors and depositors the true financial condition of other banks, or federal officials were lying about their perception of the true financial condition of these financial institutions.


Several of these large financial institutions had paid back their TARP money by June, with interest and a premium to buy back the stock options given as collateral. The last two large financial institutions, Wells Fargo and Citigroup, announced plans to do so this week.


If our financial system was teetering on collapse, how did the largest financial institutions in the country get so well so fast? After all, this occurred in the midst of a severe recession during which demand for financial service products has sharply declined.


Some look at this and say, it proves how effective the government intervention has been. That's one explanation.


Another is that excessively lax monetary policy and careless federal activity in the secondary mortgage market (Fannie Mae and Freddie Mac) created a bubble in collateralized debt obligations. When the bubble burst and the sorting out began, Washington panicked and overreacted. And the reason financial institutions recovered so quickly in the midst of a severe recession is that they weren't as sick as Washington thought to begin with.


The chronology and the facts more comfortably fit the latter explanation than the former.

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.

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© 2009, The Arizona Republic

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