Saturday Crisis Notes

This morning it’s irritating to hear President Bush cheerleading the pathetic response to the world financial crisis his Administration has been a huge part of.  It makes a person quite receptive to Daniel Schorr’s call for a constitutional amendment to move the transition of power up after the presidential election, from January 20 to November 15.  Too bad there’s no time to do it this year.

Outside of Hank Paulson’s office, there seems to be a consensus about adding the critical second part of the UK rescue plan to the halfhearted and terrified announcement Paulson made yesterday about capital injections into banks through equity stakes— guaranteeing overnight interbank loans.  Without that, the credit freeze has little chance of abating.

The Times this morning is weighing in:

The plan should offer some temporary government guarantee for deposits and loans to unlock interbank lending and gain some time to figure out which banks can be saved and which cannot. It should provide for governments to quickly inject equity capital into banks. It should be coordinated internationally, with burden-sharing provisions that specify which governments will provide capital to banks that do cross-border business.

The approach need not be identical in each country, but the bank rescue announced by the British government this week provides a useful template. It offers to insure up to about $425 billion worth of new bank debt, forces banks to raise new equity capital and makes government money available to buy equity.