Zubin Jelveh

Worth Reading
September 25, 2009

Could the Dems lose the House in 2010? Keynes' "General Theory" was all about rational expectations. And he was right that you could spend your way out of a recession. Significant outflows from mutual funds even as stock prices rise. A primer on how insurance companies make money. Death bonds ain't no mortgage-backed securities.

Securitization Is to Blame, Just Not the Way You Think
September 25, 2009

Felix Salmon calls me out for arguing that securitization might not be to blame for the decline in lending standards. If lending standards dropped at the same time as the securitization rate soared, I’d say there’s a strong correlation between the two, and a pretty good prima facie case for a causal relationship too. I actually agree with Felix here. As I'll explain, it's hard to argue that lending standards didn't decline because of the introduction of securitization.

Worth Reading
September 24, 2009

Treasury inspector general says unlikely that U.S. will profit from bailouts. Volcker criticizes Obama finacial regulation plan. Prepared testimony from Volcker, Cochrane, Levitt and others on House hearing on systemic risk. Business school applications are levling off this year. Why there might not be a jobless recovery. The inequity of Congress's plan to extend jobless benefits.

More Stress Tests, Please
September 24, 2009

Although higher capital requirements do seem like a no-brainer, Andrew Kuritzkes and Hal Scott offer some words of caution in the FT: The five largest US financial institutions subject to Basel capital rules that either failed or were forced into government-assisted mergers in 2008 – Bear Stearns, Washington Mutual, Lehman Brothers, Wachovia and Merrill Lynch – had regulatory capital ratios ranging from 12.3 per cent to 16.1 per cent as of their last quarterly disclosures before they were effectively shut down.

Worth Reading
September 23, 2009

Stiglitz/Sen commission on flaws in GDP as measure of social health issues final report. Richard Posner discovers Keynes. Someone is actually defending the rating agencies. Oil discoveries are on the rise. John Tierney writes up the US-EU longevity gap study that I had some problems with. The United States of McDonalds.

When Borrowers Choose Food Over Shelter
September 23, 2009

In the comments to my latest post on strategic defaults, rhubarbs make some very solid points: I'm sympathetic to your reading of this methodology. However, paying consumer-credit bills and not paying one's mortgage is a choice, and thus a strategic allocation of resources. The fact that this behavior is more prevalent in areas where housing values have dropped, and thus mortgages are more likely to be underwater, tends to reinforce the notion that this is a form of strategic default. Why have these people made this particular choice among which bills to pay?

Worth Reading
September 22, 2009

Fed may be preparing markets for the beginning of a wind-down. NYC charter schools are closing the Scarsdale-Harlem achievement gap. Thanks to industry vigilance, credit scores can suffer even without missed payments. Will job growth be here sooner than we think? More doubts about the universality of the Long Tail theory. Why the dollar might be not replace the yen as the carry trade currency of choice.

Enough With the Strategic Default Accusations!
September 22, 2009

A new paper on walk-aways (i.e., defaulting on a mortgage whose payments you can still afford because it exceeds the value of your home) has been making the rounds, which means another opportunity to wheel out those debunking skills. The study -- a copy of which I've read but haven't seen on the web anywhere -- was conducted jointly by credit bureau Experian and consultancy Oliver Wyman and claims to use "extremely stringent" criteria in identifying strategic defaults, i.e.

Worth Reading
September 21, 2009

Did ratings agencies know they would trigger AIG's meltdown? State gambling revenues fall for first time in three decades. Despite recent positive housing numbers, delinquencies are still a problem. Non-renewable sources of energy get more tax breaks than green ones. Foreigners can't get enough of those American Treasuries. Will an intergalactic economy eventually stop growing?

The Sorry State of Financial Literacy
September 21, 2009

From a new NBER paper by Annamaria Lusardi, Olivia Mitchell, and Vilsa Curto (free version): We found that most young adults are not well equipped to make financial decisions: only 27% of young people in our sample possessed knowledge of basic financial concepts including inflation and risk diversification and could do simple interest rate calculations.

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