Prieur’s readings (February 23, 2009)

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Todd Harrison (Minyanville): A five-step guide to contagion, February 10, 2010.
It is widely accepted that grieving arrives in five stages: denial, anger, bargaining, sadness, and acceptance. If we apply that psychological continuum to the financial market construct, it offers a valuable lens with which to view this evolving crisis.

• Joseph Stiglitz (Forbes): Transcript, February 22, 2010.
Nobel Prize-winning economist Joseph Stiglitz discusses where capitalism went wrong and what its future iterations might be like.

• Caroline Baum (Bloomberg): Bernanke can tell Congress he stiffed the banks, February 22, 2010.
When Ben Bernanke makes his pilgrimage to Capitol Hill Wednesday to present the Federal Reserve’s semi-annual monetary policy report to Congress, he will have one new strike against him: the increase in the discount rate. If he plays his cards right, he can turn a liability into an asset — especially if he follows a few basic pointers …

• Deborah Solomon (The Wall Street Journal): Bailout anger undermines Geithner, February 21, 2010.
Timothy Geithner’s role in calming the financial crisis landed him the coveted job of Treasury secretary last year. That same résumé is now dogging him. In his next test, Mr. Geithner will find out this week how lawmakers are treating one of his main goals – revamping the nation’s financial regulations – when Senate Banking Committee Chairman Chris Dodd unveils his new bill. In Washington, where perception can take on the status of fact, the political woes facing Mr. Geithner are diminishing his authority.

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• Arthur Levitt (The Wall Street Journal): Risk and discipline in the financial markets, February 21, 2010.
There is now a high probability that the greatest financial crisis in three generations will yield not one piece of meaningful financial regulatory reform. Perhaps the last best chance to rescue the situation rests with Sens. Christopher Dodd (D., Conn.) and Robert Corker (R., Tenn.), who are at work on a compromise bill.

• Michael Blumenthal, Nicholas Brady, Paul O’Neill, George Shultz and John Snow (The Wall Street Journal – letters): Congress should implement the Volcker Rule for banks, February 21, 2010.

• Barbara Kiviat (TIME): How big is the threat from option ARMs? February 21, 2010.
Is the option adjustable-rate mortgage the next subprime disaster? For anyone who remembers that souring subprime loans kicked off the real estate meltdown, that’s a scary thought. The kicker is that most option ARMs undergo payment spikes after five years, which means the brunt of the impact has yet to be felt. That will change in late 2010, delivering another blow to the fragile housing market just as it begins to regain strength.

• William Mellor (Bloomberg): China new village makes Chanos see Dubai 1,000 times, February 22, 2010.
The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.”

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