Secondary Sources: Marbles, Oil Rescue, Bear, Discount Window

A roundup of economic news from around the Web.

Losing Our Marbles: Steve Waldman on his Interfluidity blog explains the credit crisis for Kindergarteners, likening the situation to a game of marbles where everyone has promised to give more than they have. “A credit crisis arises when many more promises are made than can possibly be kept, and disputes emerge about how and to whom promises will be broken. It’s less a matter of SIVs than ABCs.” On his Economist’s View blog, Mark Thoma responds to the metaphor with a solution that can work in marbles and the current financial crisis.

Oil Producer Rescue: Writing for the Financial Times, Anil Kashyap and Hyun Song Shin argue that Middle East sovereign wealth funds could help prop up the troubled companies facing credit issues. “The quickest solution is to identify some buyers before the next spiral down. One obvious set of buyers are the Middle Eastern sovereign wealth funds. They have stepped up once and were burnt on their first wave of investments. But since the January meeting of the Fed's open market committee, when the central bank made it abundantly clear that it will try everything possible to stave off collapse, oil prices have risen from roughly $92 a barrel to $109 (as of March 18). Other commodity prices have also risen over this period. Given the deteriorating prospects for the global economy over this time, a plausible interpretation is that some of the financing that might have gone to the financial institutions has instead been directed towards buying commodities such as oil. This portfolio reallocation represents a pure windfall for the oil producers.”

Bear Bankruptcy?: The Less Than Least blog writes that it might be too short-sighted to totally write-off the possibility of bankruptcy for Bear Stearns. “No doubt the Fed was worried that a bankruptcy filing would further spook investors. This may be correct, but the fears would have been irrational ones, and the Fed could have assuaged them by emphasizing its commitment of $30 billion to stabilize Bear Stearns's assets. I don’t think we've seen the last of the bankruptcy option. If Bear Stearns' shareholders get serious about challenging the deal with JPMorgan, Bear Stearns may at least threaten to file for bankruptcy to beat back the challenge. Or it may file for bankruptcy in order to complete the sale.”

Visiting the Discount Window: With his tongue firmly planted in his cheek, Peter Jeffrey decided to visit this Discount Window everyone is talking so much about. “The speaker crackled to life, and through it a young woman said brightly, ‘Thanks for visiting the discount window, take your order, please?’ ‘Oh, hi,’ I said, startled. I had come here out of wonderment — I didn’t think I’d actually get lubricated. ‘Oh,’ I said again, blanking. ‘I’d like to borrow, like, a hundred dollars?’ ‘You mean a hundred thousand or a hundred million, sir?’ the young woman’s voice replied. Tiny beads of sweat sprang out of the pores on my neck, just like in the cartoons. ‘A hundred thousand, please.’ ‘Would you like to make that a Happy Loan?’ ‘Sure. I’ve been a little down.’ ‘Great, that’s a hundred thousand at three and a quarter, and you get ninety days stedda thirty since it’s a Happy. You want swaps with that?’ ‘What?’ ‘Side of credit default swaps, sir?’ I went for a medium (they don’t have small), the speaker crackled and she said, ‘Thank you for playing your part to restore confidence to financial markets, drive around, please.’ I felt Happy. And a twinge of Moral Hazard, or was that the chili dog?”

Compiled by Phil Izzo