Benn Steil

Geo-Graphics

A graphical take on geoeconomic issues, with links to the news and expert commentary.

Can the G7 Save the Market?

by Wednesday, October 8, 2008

The Federal Reserve has announced a series of extraordinary measures to unclog credit markets. However, credit markets remain frozen, and as the graph above indicates, the equity markets have responded negatively. The continued credit market freeze points to a need for strong policy action. The following articles discuss a possible role for international coordination through the G7 and IMF. Read more »

Fed Balance Sheet Troubles

by Wednesday, October 1, 2008

The U.S. Senate passed Paulson’s $700 billion rescue plan three days after the House rejected it. The House is expected to vote again on Friday. While the political maneuvering continues, the Federal Reserve is forced to hold things together through greater easing and expansion of its liquidity provisions, but as the graph above indicates, its balance sheet is severely stretched. The articles below discuss the limited options left for the Fed. Read more »

Bailout Failure

by Tuesday, September 30, 2008

Markets had their worst day since the 1987 crash following the House vote to reject Paulson’s rescue plan. The Federal Reserve and the Treasury are expected to hold things together through greater easing and the expansion of the Federal Reserve balance sheet while political maneuvering blocks an explicit plan for the time being. The articles below discuss the consequences of this vote and the options left for the Fed and Treasury going forward. Read more »

Wall Street Bailout

by Friday, September 26, 2008

The charts above put the size of Paulson’s $700 billion rescue plan into perspective. Given that $700 billion is small relative to the total assets of all FDIC insured institutions, the design of the bailout will be at least as important as the size. Government money may have more impact if it is used to bolster banks’ capital rather than to bolster their assets. The following articles capture some of the debates around the bailout plan. Read more »

Proposals for Wall Street

by Monday, September 22, 2008

As the graph above indicates, the markets’ perception of the risk of failure increased following the bankruptcy of Lehman Brothers. The Wall Street crisis has demonstrated the need for a systematic solution rather than case-by-case bailouts. Secretary Paulson has responded with a plan to create a $700 billion fund to buy up troubled assets from banks. The articles below discuss the risks involved and propose alternative solutions. Read more »

Sovereign Wealth Funds and Transparency

by Monday, September 15, 2008

As the graph above indicates, there is a clear correlation between ‘democracy’ and ‘sovereign fund transparency’. However, the composition of countries with sovereign funds is shifting toward large, poor, and often autocratic countries whose interests are less aligned with the U.S. The articles below discuss how policymakers can act to address the transparency and security concerns raised by the growth of sovereign wealth funds. Read more »

Emergence of State Capitalism

by Monday, September 8, 2008

After years of celebrating the triumph of market capitalism, many of its advocates today are troubled by the emergence of ‘state capitalism’, particularly in the form of sovereign wealth funds. How should liberal capitalism respond when autocracy is the highest bidder? Is autocratic ownership dangerous to economic robustness? Read more »

Government Sponsored Enterprises

by Tuesday, August 26, 2008

Financial markets believe that the game is up for Fannie Mae and Freddie Mac, the Government Sponsored Enterprises that provide or guarantee half of the mortgages in the United States. As our graph shows, there has been a sharp spike in the implied probability of GSE bankruptcy. Are we prepared for a GSE collapse? How will the mortgage market continue to function? Read more »