Tuesday, September 23, 2008

The Meltdown

Prudence is well-advised. Roger Lowenstein:

In 1932, at the height of the Great Depression, the government created the Reconstruction Finance Corp. to make loans to banks, railroads and others. President Hoover asked for $2 billion--equivalent in today's money to $30 billion--and spent just under that amount in the RFC's first year. The country then was in the midst of an economic catastrophe. Economic output had dropped 45 percent. Production of steel and autos were each down by three-quarters. Unemployment was 24 percent, and so on.

The allocation sought by Paulson is 23 times bigger. And it is in addition to the tens of billions pledged to back loans to Bear Stearns, Fannie, Freddie and A.I.G.