Happy Thought of the Day

Here's the opening bit from an article by James Surowiecki in The New Yorker magazine that plants a happy thought in your head. Everybody needs a happy thought from time to time to make them feel better:

Not long ago, many of America’s biggest banks made terrible bets on overpriced real estate and suffered huge losses. While the banks insisted that they were fundamentally healthy, economists and politicians declared many of them to be insolvent. Government regulators, though, allowed the banks to stay in business. The banks hunkered down and cut back sharply on new lending, and the resulting credit crunch made an already weak economy worse.

That sounds like the story of what just happened to the U.S. economy, but actually it’s the story of what happened at the beginning of the nineteen-nineties, after banks found themselves sitting on billions in worthless loans to Sun Belt developers and other commercial builders. And, if you tweak the details a bit, it’s also the story of what happened in the early eighties; that time, it was loans to developing countries that got the banks in trouble. In other words, while the current banking crisis is exceptionally severe, it’s not exactly new. It’s the third major banking crisis in the past thirty years, which is at least a couple of crises too many. And that’s forcing the Obama Administration to confront two huge tasks at once: rescuing the economy from the current meltdown, and figuring out how to prevent the next one.

The rescue effort, surprisingly, may be the easier of those tasks; although recurrent financial turmoil is hardly a confidence-booster, the fact that the U.S. economy—unlike, say, Japan’s—has recovered well from previous banking disasters offers hope that the government’s strategy will work.

In the middle the article provides some analysis of the current situation and the interprets the Obama administration's actions. The article then ends on the following hopeful consideration:

In effect, the Administration is trying to do two things at once. In solving the current crisis, it’s partnering with Wall Street, using the existing system to try to stabilize the economy. But in thinking about the future it’s trying to use hostility to Wall Street to bring about serious changes in the system. This is quite a balancing act: let’s hope the Administration can pull it off.