While the Central Bankers Played Sudoku

Here's a nice clean explanation of why the stimulus plan won't work, from Fabrice Taylor in the Globe and Mail today:

I'm sure some overpaid bank economist could put down his Beaujolais long enough to explain why a mushroom cloud of leverage is okay because of X, Y and Z. But remember we want common sense here, not propaganda. Too much debt is fatal – it's not debatable.

A perfect confluence of stupidity, greed and incompetence only made matters worse. Greedy people lent and dumb people borrowed, and in the meantime incompetent governments and central bankers played Sudoku instead of policing ratings agencies, hedge funds and even government-sponsored firms such as Fannie Mae. And in turn, this credit bubble propped up bad businesses. Here are your examples:

General Motors wants more money to avoid a Chapter 11 filing. General Motors' vice-chairman pooh-poohed hybrid cars as recently as a year ago.

Bank of America got handouts, which you could easily argue were used to help finance the purchase of Merrill Lynch, which you could argue made it easier for Merrill to pay almost $4-billion in bonuses to the executives who drove it to the brink of bankruptcy.

Citigroup gets bailed out as a reward for destroying billions of shareholder money.

General Electric massaged its earnings for years – and former CEO Jack Welch admits as much in his gripping tell-all book about how great he is – and it gets help.

Some homeowners who can't pay their mortgages will get money, while those who are servicing their debt get nothing.

Hat tip: Pat