New York City     Last night at the Citi Dialogues with a mix of bank executives and community based and development organizations, we listened to the chief economist for the bank give us his view of the world. He had just stepped off a plane from china but the discussion was focused on the states.

There was a weird sort of optimism to his remarks. There was no question in his minds that we were in a recession, but clearly he did not believe we needed to man the lifeboats. The housing crisis was bad, but other numbers argued that the basic economy was fundamentally strong. The heart of his case seemed to be that if confidence came back to credit markets, there would be tragedy and pain in the housing sector (for families) but the ship would sail on.

He painted a picture of googobs of money that was being held in hedge and pension funds and elsewhere that was "waiting to work" again but was sitting back and waiting for the bottom to be hit so that low prices would allow big profits. We were not there but his most optimistic view was that money couldn’t hold out. They couldn’t be ok with 1 per cent returns against 4 per cent inflation so would have to move.

Someone asked about the problem of transparency. The explanation was long but the bottom line was clear. The sharpies are going to keep bundling all manner of things together, and citizens should stay away from the edge of the water. It was too deep and the waves too rough.

He thought the capital ratios for banks were wrong and hurting investments from being made. Good luck that that bubba issues about equity, job losses, business closures did not have pride of place. Citi’s own role in any of this was not discussed.
The fed was doing right on interest but needed to keep its mouth shut.

There were precedents. Something in 1763 was similar. Huh? Worse, he kept referring to the similarities in the Korean crisis 10 yrs ago which was brutal! If this is good news, don’t call us when you think its going bad!

The economist was a genial guy but the more he talked and the more questions were asked the clearer it became that once again we are on our own.