Word: question
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...answer to the first question is no. Recapitalization needs will likely exceed what the current stress tests suggest since macroeconomic conditions are bound to be worse than the consensus anticipates, making the adverse scenario of the stress tests look mild. At this point in time, banks are still facing well over $1 trillion in losses over the next couple of years, even if low short-term interest rates make new loans very profitable. Moreover, according to RGE Monitor, real U.S. GDP growth will inch back into positive rates only toward the end of 2009 rather than at the beginning...
...Answering the second question - repairing bank balance sheets - is neither simple nor clear-cut. What is clear is that the capital needed will not come (entirely) from private hands. Banks and policymakers will essentially have a few different options: banks can issue more common stock; policymakers can push more conversions of preferred shares (or liabilities) into tangible common stock of the troubled banks; or more capital can be injected using taxpayers money, effectively taking control and (partially) nationalizing the banks...
...most urgent question is the meaning of economic conservatism. Representative Patrick McHenry of North Carolina, a conservative who keeps a bust of Reagan on his desk, surprised me by declaring that the Reagan era is over. "Marginal tax rates are the lowest they've been in generations, and all we can talk about is tax cuts," he said. "The people's desires have changed, but we're still stuck in our old issue set." Snowe recalls that when she proposed fiscally conservative "triggers" to limit Bush's tax cuts in case of deficits, she was attacked by fellow Republicans...
...those gains could be fleeting. There's no question that Republican leaders must rebuild their party's brand after a decade of disastrous rule. To do so they should follow the advice of their first President, Abraham Lincoln, who told a beleaguered Congress during the darkest days of the Civil War that it was time to think anew. (See "Obama's 100 Days: Behind-the-Scenes Photos...
...program his overarching priority. Defanging Iran, his aides argue, is also the key to any progress with the Palestinians, because the Israelis claim that Hamas is nothing more than an Iranian proxy. And while the Obama Administration has begun unfurling a strategy of engagement aimed at addressing the nuclear question and other points of tension with Iran, Netanyahu has warned that time is short and that Israel will act militarily if U.S. diplomacy fails to halt uranium enrichment in Iran. (The Pentagon fears that military action will be ineffective in stopping Iran from pursuing nuclear weapons, and would trigger...