Start making your Halloween costumes now
Brad DeLong on Zombie Banks
And here is my worry about the current plan to buy preferred rather than common stock of the banks. Preferred stock runs a risk of creating zombies--if shareholders and executives conclude that the preferred has all the equity value if they continue business as usual, then they will not continue business as usual but will instead start behaving like the Japanese banks of the 1990s. And we don't want that.
By mighty spells the Head Voodoo Priest Henry Paulson has raised the corpses of America's biggest banks from the graves to which the financial crisis was consigning them, but has he restored them to life, or just to zombiehood? Will they do their job for the economy, or will they begin wreaking destruction, all the while crying out: "BBRRAAIINNS! BBRRAAIINNSS!"
And here is my worry about the current plan to buy preferred rather than common stock of the banks. Preferred stock runs a risk of creating zombies--if shareholders and executives conclude that the preferred has all the equity value if they continue business as usual, then they will not continue business as usual but will instead start behaving like the Japanese banks of the 1990s. And we don't want that.
By mighty spells the Head Voodoo Priest Henry Paulson has raised the corpses of America's biggest banks from the graves to which the financial crisis was consigning them, but has he restored them to life, or just to zombiehood? Will they do their job for the economy, or will they begin wreaking destruction, all the while crying out: "BBRRAAIINNS! BBRRAAIINNSS!"