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National Review Online

 

Uncertainty Rate

October 04, 2009

By Nicole Gelinas

The federal government reported Friday that the American economy shed 263,000 jobs in September. The same morning, the Wall Street Journal reported that lenders seeking to recover money from last year’s Lehman Brothers bankruptcy are concerned that the Federal Reserve, which had lent $46 billion to the investment firm, was paid “promptly and in full,” possibly at the expense of other lenders with equivalent rights to the money.

The news items are related. Continued fallout from last year’s financial meltdown reminds observers that Washington still hasn’t figured out what it is going to do to create an environment in which financial firms can consistently fail, which would subject them to market discipline. Potential investors thus realize that the existing system doesn’t offer a rational way for them to assess the future risk of loss. Instead, as Lehman and other events last year showed, it is a process shadowed by the perception of random political risk and opacity.

Washington’s inaction contributes to the financial industry’s uncertainty. Because the financial industry is the infrastructure through which the rest of the economy does its lending and borrowing, this uncertainty hurts job creation.

Original Source: http://corner.nationalreview.com/post/?q=NmZiM2E5OGVhYmI0OTJmMGY0OTFiN2EyMTNlM2FhMjE=

 

 
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