Thank you notes

Yesterday's market gains were quite dramatic, and at least as of this writing, we don't seem to be giving them back today. So who gets the thank you notes?

First, we should thank Barney Frank and anyone else in Congress who helped him slip that provision into the bailout bill which allows Treasury to directly infuse cash into the banks by buying equity shares. Henry Paulson didn't ask for it, and didn't want it, but Congress gave it to him anyway.

Clearly, the former Goldman-Sachs CEO would have preferred to limit his actions to buying those nasty toxic assets from his old pals in finance. Having the power, clearly, was not enough to get him to use it -- and so thanks go out to France, Spain, Italy, and especially the UK for semi-nationalizing their own banks and thereby forcing his hand. (I think a nod is also due to Ireland, which started the ball rolling last week when it guaranteed all deposits in Irish banks. That meant the rest of Europe had to act fast to keep depositors from moving all their money to Ireland.)

So now $250 billion of our taxpayer $700 billion will be buying shares of preferred stock instead of shares of unwanted subprime derivatives. Let's hope the other $450 billion also is diverted from Paulson's original purpose. I suspect there is a good chance that can happen, because it is likely to take more time than the Bush Administration has left in office to chase down the relevant crap and approximate how much it may be worth.

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I'd also like to extend personal thanks to the Nobel Committee that awarded this year's prize in Economics to Paul Krugman. To me, Krugman winning the prize is a kind of personal validation, since my perspective on economic policies coincides with his about 95% per cent of the time.

Did those wily Swedes pick Krugman this year to extend one parting middle finger to George W. Bush? That probably helped them decide to give Krugman the award this year -- but if it hadn't been this year, it still would have happened eventully. Krugman has a marvelous talent for seeing things that are right in front of our eyes, but which other academic economists miss because they are blinded by orthodoxy or ideology. His contributions to the field are very real, and very significant -- and I offer him my sincere congratulations