US credit shrinks at Great Depression rate prompting fears of double-dip recession

Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.

By Ambrose Evans-Pritchard, International Business Editor
14 Sep 2009

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn). "There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness." The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate. Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc. "For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said. It is unclear why the US Federal Reserve has allowed this to occur. Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.

He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetisation. Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn. "The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."

Referring to the debt-purge policy of US Treasury Secretary Andrew Mellon in the early 1930s, he added: "The pressure on banks to de-risk and to de-leverage is the modern version of liquidationism: it is potentially just as dangerous." US banks are cutting lending by around 1pc a month. A similar process is occurring in the eurozone, where private sector credit has been contracting and M3 has been flat for almost a year. Mr Congdon said IMF chief Dominique Strauss-Kahn is wrong to argue that the history of financial crises shows that "speedy recovery" depends on "cleansing banks' balance sheets of toxic assets". "The message of all financial crises is that policy-makers' priority must be to stop the quantity of money falling and, ideally, to get it rising again," he said. He predicted that the Federal Reserve and other central banks will be forced to engage in outright monetisation of government debt by next year, whatever they say now.

Economist warns of double-dip recession

By Robert Cookson and Sundeep Tucker in Hong Kong

September 14 2009 15:01 | Last updated: September 14 2009 15:01

The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession, according to one of the few mainstream economists who predicted the financial crisis.

Speaking at the Sibos conference in Hong Kong on Monday, William White, the highly-respected former chief economist at the Bank for International Settlements, also warned that government actions to help the economy in the short run may be sowing the seeds for future crises. “Are we going into a W[-shaped recession]? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised,” he said, referring to the risks of a so-called double-dip recession or a protracted stagnation like Japan suffered in the 1990s. “The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.” The comments from Mr White, who ran the economic department at the central banks’ bank from 1995 to 2008, carry weight because he was one of the few senior figures to predict the financial crisis in the years before it struck.

Mr White repeatedly warned of dangerous imbalances in the global financial system as far back as 2003 and – breaking a great taboo in central banking circles at the time – he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money. On Monday Mr White questioned how sustainable the signs of life in the global economy would prove to be once governments and central banks started to withdraw their unprecedented stimulus measures. “The green shoots are certainly out there – the question is what kind of fertiliser is being used on them,” he said.

Worldwide, central banks have pumped thousands of billions of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making. These measures may already be inflating a bubble in asset prices, from equities to commodities, he said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their “exit strategies”. Meanwhile, the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved, he said. Also present at the Sibos conference was Joseph Yam, who is stepping down as chief executive of the Hong Kong Monetary Authority after 16 years. He told delegates of the myriad “challenges” facing those working for greater stability in the financial sector.

In a hard-hitting address, Mr Yam said that large banking profits and staff bonuses led to lower financial efficiency and contributed to the financial crisis. Mr Yam is tipped to become an adviser to the People’s Bank of China, the country’s central bank, after he leaves his post next month. He said there was a conflict between the private, short term interest of financial groups to maximise profits and the public interest of effective financial intermediation that provided support to the economy. “This conflict has not been talked about much, if at all, even in central banking forums,” he said.

Why some economists could see it coming

By Dirk Bezemer

September 8 2009 03:00 | Last updated: September 8 2009 03:00

From the beginning of the credit crisis and ensuing recession, it has become conventional wisdom that "no one saw this coming". Anatole Kaletsky wrote in The Times of "those who failed to foresee the gravity of this crisis" - a group that included "almost every leading economist and financier in the world". Glenn Stevens, governor of the Reserve Bank of Australia, said: "I do not know anyone who predicted this course of events. But it has occurred, it has implications, and so we must reflect on it." We must indeed.

Because, in fact, many had seen it coming for years. They were ignored by an establishment that, as the former Federal Reserve chairman Alan Greenspan professed in his October 2008 testimony to Congress, watched with "shocked disbelief" as its "whole intellectual edifice collapsed in the summer [of 2007]". Official models missed the crisis not because the conditions were so unusual, as we are often told. They missed it by design. It is impossible to warn against a debt deflation recession in a model world where debt does not exist. This is the world our policymakers have been living in. They urgently need to change habitat.

I undertook a study of the models used by those who did see it coming.* They include Kurt Richebächer, an investment newsletter writer, who wrote in 2001 that "the new housing bubble - together with the bond and stock bubbles - will [inevitably] implode in the foreseeable future, plunging the US economy into a protracted, deep recession"; and in 2006, when the housing market turned, that "all remaining questions pertain solely to [the] speed, depth and duration of the economy's downturn". Wynne Godley of the Levy Economics Institute wrote in 2006 that "the small slowdown in the rate at which US household debt levels are rising resulting from the house price decline, will immediately lead to a sustained growth recession before 2010". Michael Hudson of the University of Missouri wrote in 2006 that "debt deflation will shrink the 'real' economy, drive down real wages, and push our debt-ridden economy into Japan-style stagnation or worse". Importantly, these and other analysts not only foresaw and timed the end of the credit boom, but also perceived this would inevitably produce recession in the US. How did they do it?

Central to the contrarians' thinking is an accounting of financial flows (of credit, interest, profit and wages) and stocks (debt and wealth) in the economy, as well as a sharp distinction between the real economy and the financial sector (including property). In these "flow-of-funds" models, liquidity generated in the financial sector flows to companies, households and the government as they borrow. This may facilitate fixed-capital investment, production and consumption, but also asset-price inflation and debt growth. Liquidity returns to the financial sector as investment or in debt service and fees.

It follows that there is a trade-off in the use of credit, so that financial investment may crowd out the financing of production. A second key insight is that, since the economy's assets and liabilities must balance, growing financial asset markets find their counterpart in a growing debt burden. They also swell payment flows of debt service and financial fees. Flow-of-funds models quantify the sustainability of the debt burden and the financial sector's drain on the real economy. This allows their users to foresee when finance's relation to the real economy turns from supportive to extractive, and when a breaking point will be reached.

Such calculations are conspicuous by their absence in official forecasters' models in the US, the UK and the Organisation for Economic Co-operation and Development. In line with mainstream economic theory, balance sheet variables are assumed to adapt automatically to changes in the real economy, and can thus be safely omitted. This practice ignores the fact that in most advanced economies, financial sector turnover is many times larger than total gross domestic product; or that growth in the US and UK has been finance-driven since the turn of the millennium.

Perhaps because of this omission, the OECD commented in August 2007 that "the current economic situation is in many ways better then what we have experienced in years . . . Our central forecast remains indeed quite benign: a soft landing in the United States [and] a strong and sustained recovery in Europe." Official US forecasters could tell Reuters as late as September 2007 that the recession in the US was "not a dominant risk". This was well after the Levy Economics Institute, for example, predicted in April of that year that output growth would slow "almost to zero sometime between now and 2008".

Policymakers have resisted inclusion of balance sheets and the flow of funds in their models by arguing that bubbles cannot be easily identified, nor their effects reliably anticipated. The above analysts have shown that this is, in fact, feasible, and indeed essential if we are to "see it coming" next time. The financial sector is just as real as the real economy. Our policymakers, and the analysts they rely on, ignore balance sheets and the flow of funds at their peril - and ours.

* ' No One Saw This Coming': Understanding Financial Crisis Through Accounting Models, MPRA

The writer is a fellow at the economics and business department of the University of Groningen in the Netherlands

Obama sets stage for using budget maneuver to pass health reform

By Sam Youngman
The Hill
09/10/09

President Barack Obama this week has been laying the foundation for Senate Democrats to use a controversial budget maneuver to pass healthcare reform. By offering Republicans olive branches during his address to Congress on Wednesday, Obama has set up a win-win situation. If GOP lawmakers embrace compromise, a healthcare bill would pass Congress easily. But the more likely scenario is that Republicans will continue to oppose Obama’s plan, and the president later this fall will be able to note he tried to strike a deal with the GOP but could not. That will set up a Democratic argument that Senate leaders have been forced to use a partisan budget tool known as reconciliation to pass a health bill through the Senate by a simple majority, instead of 60 votes. Under the budget plan they passed earlier this year, Democrats could invoke the reconciliation process on Oct. 15.Republicans contend that the use of reconciliation would be at odds with Obama’s call for bipartisanship during his 2008 presidential campaign. But Obama has countered that argument in recent days by forcefully resurrecting the anti-Washington rhetoric that got him elected.In Cincinnati on Monday, Obama blamed the "usual bickering in Washington" for the "funk" supporters of healthcare reform were enduring. And in a discussion with students at Wakefield High School in Arlington, Va., on Tuesday, Obama said "there are a lot of politicians like that who, all they're thinking about is just, ‘How do I get reelected?’ and so they never actually get anything done."Then on Wednesday night, Obama sought to portray his health reform plan as one that contains both Republican and Democratic ideas."The time for bickering is over. The time for games has passed," Obama said. "Now is the season for action."Rep. Joe Wilson’s (R-S.C.) outburst on Wednesday was an unexpected gift to the White House, accentuating Obama’s point that bitter politics is getting in the way of improving the healthcare of Americans. White House officials insist they still wants a broad bipartisan deal, but — realizing that is likely out of reach — they have shifted their strategy to focus on the bottom line. “I think getting something done is paramount here," a senior administration official said before Obama’s address to Congress. "We want to bring along everyone who’s willing to come with us, but the fact that not everyone is willing to come with us is not an excuse to fail in dealing with what is really a fundamental issue that has to be done."On "Good Morning America" on Wednesday, Obama repeated his call for Congress to stop playing politics. He also acknowledged he made a tactical error in giving lawmakers too much leeway to craft a bill. "I, out of an effort to give Congress the ability to do their thing and not step on their toes, probably left too much ambiguity out there, which allowed, then, opponents of reform to come in and to fill up the airwaves with a lot of nonsense," Obama said.The president also said that the White House has made every effort to include Republicans and their ideas in the process, but blamed "unyielding partisanship" for the absence of compromise.“Part of the frustration I have is, is that on the Republican side there are wonderful people who really operated on the basis of pragmatism and common sense and getting things done,” Obama said. “Those voices have been — been, I think, shouted down on that side.”Obama publicly accepted Wilson’s apology while at the same time decrying "name-calling" he says the American people won't tolerate.The president went so far as to warn Republicans that he "will not waste time with those who have made the calculation that it's better politics to kill this plan than improve it."Another aspect of the Democrats’ rationale for using reconciliation will likely be the $787 billion stimulus bill, which they note included tax cuts but was only supported by three Republicans in Congress.Republicans, predictably wary of Obama's maneuvering, said if Obama is setting up a defense of reconciliation, it will do little to blunt the blowback from both Congress and the American people.“If Democrats use controversial insider tactics to force a proposal that the majority of Americans disagree with, not only would they guarantee bipartisan opposition, but they would also spark a new level of outrage among a huge majority of people in this country," said a Senate Republican leadership aide.

Texas sends Rangers to Mexico border

The Associated Press
Sept . 11, 2009

HOUSTON - Special teams of Texas Rangers will be deployed to the Texas-Mexico border to deal with increasing violence because the federal government has failed to address growing problems there, Gov. Rick Perry said Thursday. "It is an expansive effort with the Rangers playing a more high-profile role than they've ever played before," Perry said of the Department of Public Safety's elite investigative unit. The forces, dubbed "Ranger recon" teams, are the latest effort "to fill the gap that's been left by the federal government's ongoing failure to adequately secure our international border with Mexico," he said. The governor early this year asked Homeland Security Secretary Janet Napolitano for 1,000 National Guard troops and renewed his call last month in a letter to President Barack Obama. The request is bogged down over who will pay for the troops and how they will be deployed. 'Boots on the ground'Perry's announcement Thursday comes amid increasing border violence, particularly in El Paso, mostly involving people with ties to Mexican drug gangs. "They'll be deployed to high-traffic, high-crime areas along the border," he said. "They'll give us boots on the ground, put people in these hot spots no matter what or where they may exist." Perry said the effort also would focus on remote areas where farmers and ranchers have complained of being overrun by smugglers and gangs from Mexico in numbers that also overwhelm local law enforcement and border patrol officers.
"Washington is shortchanging them, not giving them the support they need," Perry said. "As a result, we're having to dedicate our resources to deal with the challenges we have along the Texas-Mexico border and ensuing issues that porous border has created all across state of Texas." He said the state would pick up the tab of $110 million, allocated by the Legislature in the past two sessions. Perry's announcement drew immediate criticism from U.S. Sen. Kay Bailey Hutchison, who is running against the two-term incumbent in the March GOP primary. "Today's announcement is yet another empty election-year promise from Rick Perry on border security," Hutchison spokesman Joe Pounder said. Perry fired back that it was the "height of hypocrisy for someone who's been in Washington, D.C., for 16 years, who's had the opportunity to help Texas on our border security, and they've been no more successful in delivering the resources and help." "So please do that job up there first before you come down here and start criticizing about the state of Texas," he said. Hutchison also took Perry to task for the absence of any Texas agency from a federal program that allows Homeland Security personnel to work with local law enforcement on immigration issues. "Texans need a governor they can trust to actually improve our security," her campaign said in a statement. "I happen to think we've taken advantage of every program that's been effective," responded Perry, who has been branding his opponent as someone from Washington out of touch with her home state. "Pointing out one program that has been funded and leaving the 800-pound gorilla — which is 1,000 National Guard troops that we need — I am stunned someone from Washington, D.C., would say they've done enough to secure our border." Brig. Gen. Joyce Stevens, commander of the Texas Army National Guard, said about 200 soldiers and airmen already have started integrated operations with the Rangers. Tony Leal, assistant director of the Texas Rangers, declined to provide the number of his officers involved in the effort.

Anti-Government Protests Draws Tens of Thousands to D.C.

By Emma Brown, James Hohmann and Joel Achenbach
Washington Post Staff Writers
Saturday, September 12, 2009
Tens of thousands of conservative protesters crowded outside the U.S. Capitol on Saturday, a massive demonstration aimed at stopping what organizers called the over-expansion of the federal government under the Obama administration. "Hell hath no fury like a taxpayer scorned," declared Andrew Moylan, head of government affairs for the National Taxpayer Union, urging protesters to call their representatives. "You're being ignored today by the media and some politicians."
The crowd -- loud, rambunctious and sprawling -- gathered at the foot of the Capitol after a march along Pennsyvania Avenue from Freedom Plaza. Invocations of God and former President Reagan by an array of speakers drew loud cheers, echoing across the Mall. On a windy, overcast afternoon, hundreds of yellow "Don't Tread on Me" flags flapped in the breeze, mingled with U.S. and Texas state flags. "We own the dome," the crowd chanted loudly, pointing at the Capitol. About 30,000 people registered online for the march, according to one of the rally's sponsors, FreedomWorks, a Washington-based group headed by former House majority leader Dick Armey (R-Tex.). FreedomWorks and other sponsors, including Tea Party Patriots and ResistNet, comprise a loose coalition of conservative groups that helped organize several health-care and anti-tax rallies during the spring and summer. The crowd surrounded the Capitol Reflecting Pool, spilling across Third Street and onto the Mall. The sound system was inadequate to the throng; speakers on stage, at the Capitol's West Front, were too distant to be intelligible to anyone near the edges of the rally. "You will not spend the money of our children and our grandchildren to feed an overstuffed government," Rep. Tom Price (R-Ga.) said of the Obama administration, drawing loud cheers from the throng. "Our history is decorated by those who endured the burden of defending freedom," Price said. "Now a new generation of patriots has emerged. You are those patriots." The protesters descended on Washington with a long list of grievances against a government that many complained is racing toward socialism. "Health care is not listed anywhere in the Constitution," said Brian Burnell, 45, who owns an insurance company on Maryland's Eastern Shore. "How Is That Hopey Changey Thing Workin' Out For Ya?" his placard read. "You want socialism?" said Susan Clark, a District resident marching with a bullhorn. "Go to Russa!" Participants in the demonstration spanned the spectrum of conservative anger at Obama, including opponents of his tax, spending and health-care plans and protesters who question Obama's U.S. citizenship and liken his administration to the Nazi regime. By 11 a.m., the route between Freedom Plaza and the Capitol was a sea of demonstrators chanting "USA!" and carrying signs such as, "Taxed enough already," "The audacity of dope" and, "Czars belong in Russia." Most signs were handmade: "Socialism is UnAmerican," "King George Didn't Listen Either!" "Terrorists Won't Destroy America, Congress Will!" "The American Dream R.I.P." Many protesters carried the now-familiar poster of Obama made up to look like the Joker, captioned "Socialism." One man's sign read, "Having government manage your health care is like having Michael Vick watch your dog." Another sentiment: "Cash for Clunkers! Trade in your congressman!" "We're all endangered!" shouted a passerby, Dave Rue, 67, a retired Mobil Oil employee who had traveled from New Jersey. "We're endangered because they're pushing socialism on us." Some came to protest what they see as government interference with gun ownership. Shaun Bryant, 40, a leadership trainer, was among eight people who flew in from Salt Lake City. They fashioned a sign with a drawing of an AR-15 assault rifle and the words "We came unarmed from Montana and Utah . . . this time!" At the Federal Triangle Metro stop, demonstrators emerged from packed trains and broke into a rendition of "God Bless America" as they rode escalators to the street. "Nobody's standing up for us, so we have to stand up for ourselves," said Phil Chancey, 66, who drove to the District from Clinton, Tenn., for the rally. The sign he carried, deriding the president's health-care reform plan, read, "Obamacare Makes Me Sick." Debbie Wilson, 51, of Apollo Beach, Fla., flew to Washington last Sunday to make a week out of the protest. She drove to colonial Williamsburg in a rented car. "We want our country to go back to the roots of doing what our Founding Fathers wanted us to do -- less government in every aspect of my life," she said. "We walked the streets of Williamsburg, and it felt like we were learning how to be a patriot." Dozens of signs mentioned Rep. Joe Wilson, (R-S.C.), who jeered at Obama during his health-care speech to Congress on Wednesday night. Dee Meredith, 62 of Callao, Va., said she had never heard of Wilson before he shouted at the president, "You lie!" At the rally, Meredith waved a placard: "Thank You Joe Wilson." "We're the forgotten people, and he's given us a voice," she said. When Armey, in his address to the crowd, referred to Obama having pledged to uphold the Constitution, the protesters shouted at the president in absentia: "Liar! Liar!" Jeff Mapps, 29, a stagehand and labor union member from South Philadelphia, left home about 6 a.m. to come to the protest. He said he hadn't been involved in previous Tea Party demonstrations, but he watches Fox News host Glenn Beck "all the time" and he wanted to be a part of something he thinks will be historic. Beck has been drumming up support for the march. Holding a sign that said "Preserve, Protect, Defend" on a Red Line Metro train packed with conservative activists, Mapps fretted over a "blatant disregard for the Constitution." "We've been watching it for six to eight months," he said. "It was finally an opportunity to get involved. It's been boiling over . . . It's not just about health care. It's about so much more than that." Anna Hayes, 58, a nurse from Fairfax County, stood on the Mall in 1981 for Reagan's inauguration. "The same people were celebrating freedom," she said. "The president was fighting for the people then. I remember those years very well and fondly." Saying she was worried about "Obamacare," Hayes said: "This is the first rally I've been to that demonstrates against something, the first in my life. I just couldn't stay home anymore." Like countless others at the rally, Joan Wright, 78, of Ocean Pines, Md., sounded angry. "I'm not taking this crap anymore," said Wright, who came by bus to Washington with 150 like-minded residents of Maryland's Eastern Shore. "I don't like the health-care [plan]. I don't like the czars. And I don't like the elitists telling us what we should do or eat."

Obama Adviser: High unemployment for years to come

By: Eamon Javers
http://www.politico.com/
September 11, 2009
The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession. “The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.” Summers’ comments came in a briefing with reporters ahead of Obama’s speech in New York City on Monday, marking the one-year anniversary of the collapse of Lehman Brothers, an event widely regarded as having created a panic that caused the global economic meltdown.Even with his gloomy forecast for unemployment, Summers said the economy is getting better and made the case that Obama’s $787 billion stimulus package and other fiscal rescue steps headed off even more economic pain. “We are making a clear transition from rescue as a priority of public policy to sustained recovery,” Summers said. “We have moved back from the brink of financial catastrophe.” “Today, the question is, when will the recession phase end?” Summers said. He said the forecast is “for economic growth at a significant rate during the second half of 2009.” But as is usually the case in economic recovery, job creation continues to lag. The national unemployment rate is at 9.7 percent, a 26-year high, and Obama has repeatedly said he ultimately expects it to hit double-digits before beginning to fall again. The economy lost 216,000 jobs in the month of August, which was fewer than the July number of 276,000. Overall, 6.9 million jobs have been lost in the recession, which economists call the worst since the Great Depression. With his remarks about sustained high unemployment, Summers touched on one of the most sensitive issues in the economy, closely watched by average Americans as a key reading of the nation’s economic health. Unemployment is probably the single most important statistic for Democrats eyeing the mid-term Congressional elections next fall. If the unemployment rate begins to decline, the White House may have an easier time convincing voters that its enormous stimulus spending and massive federal intervention into the economy were effective. But if all the White House’s enormous efforts are unable to move the needle on unemployment, a so-called “jobless recovery” could seriously hamper the president’s party in the mid-terms.
White House spokesman Matthew Vogel said, "The President and the economic team are committed to tackling unemployment and are focused every single day on getting Americans back to work. Many economic indicators have turned positive, but employment is a lagging indicator and obviously the toughest nut to crack. We are confident that we are headed in the right direction, but that there's no room for complacency even as we see a return to growth later this year."
At the briefing, Summers walked a fine line between taking credit for the economic turnaround and declaring premature victory over the crisis. “These problems were not made in a week or a month or a year,” Summers said. “They are not going to be fixed in a week or a month or a year.” And he used the opportunity to make a pitch for the passage of financial regulatory reform – a key theme of Obama’s address Monday at Federal Hall near Wall Street. The administration’s proposals to change the rules of the road on Wall Street have been languishing on Capitol Hill. “We believe that this is the year, after what has happened, to overhaul financial regulation,” Summers said. Earlier in the week, the White House said its research indicated the $787-billion economic stimulus bill passed earlier this year had saved or created 1 million jobs so far. That’s on pace, officials said, to hit the president’s goal of saving or creating 3.5 million jobs by the time the program ends in 2010.
And on Friday, the White House put out a raft of statistics to emphasize its point that the economy is responding to the forceful efforts of the Obama team. The so-called Wall Street “fear index” is down by 58 percent since Inauguration Day; the S&P 500 is up 30 percent; and the LIBOR-OIS spread, which is widely seen as a measure of stress in the credit markets, is down 87 percent. Looking back to global economic history, Summers said, “I’m not aware of any case in which so profound a crisis was addressed so forcefully and quickly.” Summers also offered his thoughts on the TARP corporate bailout program, which has turned a profit on the amounts of money that have been repaid by large banks so far. But he said it wouldn’t be “reasonable” to expect that the entire program could turn a profit, because much of the money has been spent on inherently money losing efforts.