A voice for the Citigroup bailout
Mark Zandi, chief economist at Moodys.com, thinks the U.S. government's move to give $300 billion to Citigroup is a good idea. He tells Steve Chiotakis why this doesn't leave the free market at risk.
A partial view of the Citigroup Tower at the Lu Jia Zui Finance and Trade Area in Shanghai (Getty Images)
TEXT OF INTERVIEW
Steve Chiotakis: Mark Zandi is chief economist at Moodys.com. Mark, another financial institution in government hands. Is this the end of the free market system as we know it?
Mark Zandi: Hahah, no, but it's certainly big government intervention in the marketplace to try to shore up the market, and I think it's absolutely necessary and a good move by the government.
Chiotakis: Let's talk a little bit about the nuts and bolts of this plan with the U.S. government -- $300 billion covered by the U.S. government, is that going to be enough? Do you think there's going to be more down the road?
Zandi: Well I think at Citigroup, they were pretty careful in walling off their very bad assets, the bad residential mortgage loans, commercial mortgage-backed securities, other bad corporate loans. I'm pretty sure they got all of the bad assets into this one bad bank, so to speak, and that's what the government's guaranteeing. So I think in the case of Citigroup, they probably got it.
Chiotakis: What kind of money are we talking about in this bailout?
Zandi: Well, it really does depend on how badly these assets perform. Citigroup had to put up a chunk of money as well that will go first as these losses accumulate on these bad assets. And only after that is exhausted will the government's guarantees start to kick in. So we'll have to see -- it really does depend on how bad the economy is, how long the economy struggles and how that undermines these assets.
Chiotakis: Do you see other banks headed in this direction?
Zandi: There will be more failures, yeah. I do think, though, that the biggest failures are largely behind us, if not completely behind us. I can't think of another big institution that is as fragile. And of course, I probably would have said the same thing a couple, three weeks ago. But all the weak links in the system are being rung out, and while there will be more failures, I think they'll be smaller ones.
Chiotakis: Mark Zandi, chief economist at Moody's Economy.com. Thanks for joining us this morning.
Zandi: Thank you.
Comments
Comment | Refresh
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.