When Harold Macmillan, the wonderfully urbane former UK prime minister, was asked what he considered the biggest threat to a politician, he replied: "Events, my dear boy, events." Welcome to my world. Since this column was last penned, half of the mortgage stock of the US has been moved onto the government’s balance sheet and the world’s largest insurer has been nationalized. Investment banking as we came to know it has disappeared.
Now there is a proposal before Congress to get credit and interbank markets functioning again by injecting up to $700 billion into Tarp (Troubled Assets Relief Programme). It is not the time to debate its merits or otherwise in detail. As this is being written the future of the plan is uncertain after Congress rejected it on September 29. Your columnist is at the mercy of those wretched events.
The fevered atmosphere of the past few weeks has spawned a lot of hot air from the financially illiterate. The fear of big numbers is but one example – $700 billion is by no means loose change. But it is a cap. Japanese banks actually requested only 13% of the money that was earmarked by the FSA in 1998.