Chapter 15. State of Play 2009

History needs data, details, portraits, information, and it needs eyewitnesses.

Peggy Noonan, Wall Street Journal columnist

To investors still stranded in the frozen zone, January 2009 appeared to be new era of hope—the beginning of a cleanup campaign in which the economy found a passage out of the depths.

Democrats imagined the new White House eager to take on the ARS scandal as an easy populist mark. "Obama's looking to make waves," one observer remarked. There was hardly a ripple. Looking for action ended in dashed hope.

President Obama has yet to denounce the debacle or to take advantage of the job-creating possibilities that might grow from the unleashing of wealth that remains illiquid. You can buy quite a few jobs with the $100 billion-plus frozen in institutional and corporate accounts.

Two economics professors at the University of Delaware put a human face on the possibilities. James Butkiewicz and William Latham worked with a group of 25 companies stuck with approximately $8 billion in frozen ARS backed by student loans. These companies wanted Butkiewicz and Latham to figure out what might flow to the economy if all student loan-backed ARS were made liquid. This would include not only the $8 billion held by the companies that commissioned the study, but also the $70 billion still frozen in auction-rate student loans.

The professors concluded that for every $1 billion redeemed, 15,000 jobs and $2.3 billion in spending would be generated by new ...

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