Neel Kashkari Wants You to Read Between the Lines

If you read between the lines of what Neel Kashkari, Treasury interim assistant secretary for financial stability, said yesterday in prepared remarks to the Securities Industry and Financial Markets Association, you'll be able to understand exactly what is needed to get credit markets moving once again and what might prevent them doing so.

"Although progress has been made in the last month, our capital markets remain fragile and confidence is still shaky," he said. "As confidence returns to our institutions and our markets, we believe banks will put this capital to use by extending loans to creditworthy businesses and consumers."

Translation: "Dear Mr. Frank and other members of Congress. You cannot force banks to lend by threatening to withhold further TARP funds (or by any other means) because banks will not lend until confidence is restored. The best way to begin to restore confidence now is by doing whatever is necessary to prevent systemic failure because only by doing that will the banks become more confident that we can and will prevent systemic failure. Do not under any circumstance interfere with this process."

Kashkari said the government's announcement earlier on Monday to offer further support American International Group "was necessary to help stabilize the U.S. financial system."

Translation: "Markets cannot survive another Lehman Brothers; therefore it is essential to prevent the failure of any firm central to the global financial system. This applies to any systemic firm who underwrote credit default swaps on mortgage backed securities and/or mixed use collateralized debt obligations. See today's statement from the Federal Reserve regarding exactly how this is to be accomplished. And by the way, the new facilities designed to purchase these assets is under the auspices of the Federal Reserve specifically so that members of Congress cannot interfere with their functioning."

"We recognize that the financial system remains fragile and we continue to stand ready to prevent systemic failures,' he said.

Translation: "We're not going to be here after Jan.20 so when the new boss comes in he or she better be the same as the old boss, otherwise the agony will only be prolonged. Confidence can only be restored once banks are certain that governments will continue to stand behind the financial system and that the new Treasury Secretary will be able to stand up to Congressional meddling."

Comments

[han li:]

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2008 Nov 11 01:21 PM

[Kinabalu:]

If only Congress could read between the lines.

2008 Nov 11 03:28 PM

[k9s-4-k8:]

That pretty much sums it up, but I can hear Congress now and its growing louder, " I can't heeeaarrr you!!!!!!

2008 Nov 11 06:46 PM