With the administration set to unveil plans for regulating the securitization process (details of which are available here), it's worth taking a look back at how already-regulated banks performed during the subprime boom. In a paper put out earlier this year, a group of economists compared the quality of loans originated by regulated vs. non-regulated mortgage lenders. In the former group were megabanks and thrifts while in the latter were independent lenders like the now-defunct Ameriquest.
$230 billion budget gap projected for U.S. states in 2011. Geithner and Summers outline plans for overhauling financial regulation. The data support Krugman in his debate with Ferguson. Is Germany headed for a Japan-style "lost decade"? Foreigners are cutting back demand for U.S. financial assets. --Zubin Jelveh
Despite signs that the U.S. has avoided a repeat of the 1930's, it may be unrealistic to get overly optimistic about the country's economic future. That's the message from Nobel economist Paul Samuelson, who fears that the U.S. dollar is in for a dramatic fall: Up until now, China has been willing to hold her recycled resources in the form of lowest-yield U.S. Treasury bills. That's still good news. But almost certainly it cannot and will not last. Some day -- maybe even soon -- China will turn pessimistic on the U.S. dollar. That means lethal troubles for the future U.S.
Dow turns positive for 2009. A successful Fed could see its powers reduced. Soros wants to ban credit default swaps. Length of the average work week at its lowest since 1964. Did two men really manage to steal $134.5 billion in Treasuries? (Probably not) Top Manhattan girl's school downgraded by Moody's. -- Zubin Jelveh
"Eliot Spitzer’s recent involvement with an escort cost him not only the governorship of New York, but also some $1,000 an hour. What allows a high-end prostitute to charge a wage comparable to a top attorney, despite working in a market characterized by minimal skill requirements, little product differentiation, and non-existent barriers to entry?" That's the opening of a fascinating new working paper by Lena Edlund of Columbia University and Joseph Engelberg and Christopher Parsons of UNC-Chapel Hill investigating the high-end escort market.
Have mortgage and credit credit delinquincies peaked? Some lawmakers lost big in the financial crisis. The real deflation-adjusted interest rate could be close to 4.5%. What country has had the most cases of swine flu? Does monetary policy impact inflation in the short-run? --Zubin Jelveh
In a post on credit card regulation, James Kwak at The Baseline Scenario asserts that financial innovation did little to make charge cards cheaper: If innovation doesn’t give us new products, does it at least give us the same product at a lower price? Not so much.
Government spending and inflation don't necessarily go hand-in-hand. Oakland faces a possible bankruptcy. Emails show the Fed thought Bank of America's Lewis was "reckless." Geithner and Bair clash over Citi. Goldman CEO has doubts about the recovery. Help the government make its data more useful. -- Zubin Jelveh
Yesterday, I wrote about some new research showing how tracking search trends on Google can improve forecasts of economic activity. Doing a little more digging after the post, I realized that Google had made the same point back in April. This paper by Google economists Hal Varian and Hyunyoung Choi demonstrates that the simplest of forecasting models for things like car sales, home sales, and travel were improved by accounting for search trends. Perhaps more importantly, Varian and Choi argue that query data may help economists identify very hard-to-spot turning points.
The administration is pulling back from its overhaul of financial regulatory agencies. The House will subpoena the Fed on the Bank of America/Merrill Lynch deal. What men's undies can tell us about the state of the economy. The Fed won't ask for the right to issue debt. Will Treasury allow banks to underpay for warrants? --Zubin Jelveh