Tim Geithner and his team from treasury met with some of the cool kids from the econoblogosphere on Tuesday. FT Alphaville was too busy to attend, unfortunately, and also not invited.
So we’re grateful to Alex Tabarrok of Margin Revolution for reporting the following lines from “a senior treasury official”:
“Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front.”
“Businesses are investing in a way that shows more confidence than they are talking.” (graph here, see the last year or so AT)
The graph that Tabarrok links to is this one:
The idea is that even as the Obama administration has been criticized for being anti-business, in the real world businesses have resumed spending in the last year or so, and corporate profits are rising. It’s a good point, though the profits recovery may not last.
Tyler Cowen, Tabarrok’s co-blogger, also had a good question at the meeting, though Tabarrok doesn’t tell us how Geithner and his team responded:
The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”
Barry Ritholtz has an interesting post fantasizing about what the world would look like if bondholders and counterparties hadn’t been bailed out of this and previous financial crises. He’d probably love to know the administration’s answer to Cowen’s question, and so would we.
Related links:
Afternoon at the Treasury – Margin Revolution
2008 bailout counterfactual – Ritholtz