Economy

Tim Geithner's Small Circle of Friends
October 08, 2009

Over the past 30 years Wall Street captured the thinking of official Washington, persuading policymakers on both sides of the aisle not to regulate (derivatives), to deregulate (Gramm-Leach-Bliley), to not enforce existing safety and soundness regulations (VaR), and to stand idly by while millions of consumers were misled into life-ruining financial decisions (Alan Greenspan). This was pervasive cultural capture or, to be blunter, mind control. But when the crisis broke it was not enough. Having powerful people generally on your side is not what you need when all hell breaks loose in financia

Did the Bank Bailout Increase Lending?
October 08, 2009

U of Chicago's Casey Mulligan, pointing to an audit issued this week by the TARP inspector general, says no: Economic theory casts significant doubt on the claim that public purchases of bank equity would cause banks to lend more. Now the government’s own watchdog confirms the theory. Unforunately, the inspector general stays mum on how it arrived at its conclusion: Federal Reserve Board officials provided institution-specific data and an analysis of the state of the U.S. economy that was deemed sensitive, confidential, and, restricted.

Worth Reading
October 07, 2009

Study: Calorie posting in NYC restaurants hasn't changed behaviors. Krugman: Why does the Fed insist on reviving shadow banking? Bill Clinton: Bush should have rescued Lehman. Does a tax credit for boosting employment make sense? More signs of a thaw: Sales at eBay rose in Aug. and Sept.

Explaining Job-Creation to the Small Business Lobby
October 07, 2009

There are a number of reasons to be wary of the job-creation tax credit now gaining traction in the White House and on the Hill--chiefly, that it would provide a windfall to companies that were about to hire people anyway.

When Will the Fed Raise Rates?
October 07, 2009

The Kansas City Fed's Thomas Hoenig made some news Tuesday claiming that the Fed should tighten "sooner rather than later." This was in stark contrast to NY Fed president Bill Dudley, who echoed the FOMC's line that rates will stay low for an "extended period." Who to trust? Although both men are sufficiently vague about their timelines, I'll side with Dudley here. All signs point to the current recovery being a jobless one.

Where Will Unemployment Be in 2012?
October 06, 2009

According to this piece from yesterday's Journal, it's going to be a long, long time before unemployment returns to its pre-recession levels: The U.S. has shed 7.2 million jobs since the recession began in December 2007. How long will it take for the economy to replace them? ... In addition to replacing 7.2 million lost jobs, the economy needs an additional 100,000 a month to keep up with population growth. If the job market returns to the rapid pace of the 1990s -- adding 2.15 million private-sector jobs a year, double the 2001-2007 pace -- the U.S.

Worth Reading
October 06, 2009

Credit crunch for small biz is another reason to expect a slow recovery. What's the matter with California? John Kay: "Economics is not so much the queen of the social sciences but the servant." Should we replace the penny with a $0.37 coin? Did Taibbi get get punked? Justin Fox: Why U of Chicago economists don't like Krugman.

Disaster at the IMF
October 06, 2009

Buried in the avalanche of meaningless press releases from Istanbul is a highly significant item. Dominique Strauss-Kahn, Managing Director of the IMF, “has proposed the appointment of Naoyuki Shinohara, to the position of Deputy Managing Director. Mr. Shinohara, a former Vice Minister of Finance for International Affairs of Japan, will succeed Takatoshi Kato.” This is a disaster. I have nothing against Mr.

The Pay Czar Is Making Sense
October 06, 2009

I was pretty dubious that Ken Feinberg, the administration pay czar, would have much effect on Wall Street compensation--even at the handful of TARP basket-cases (AIG, GM, BofA, Citi, etc.) where you'd expect the administration to have leverage. In weaker moments, I even imagined Feinberg as a kind of a fig leaf, whose very existence confirmed that the White House didn't think there was much to be done about executive pay.

The IMF Is Being Taken Over by the G20. Does it Matter at All?
October 06, 2009

Sunday’s communique from the International Monetary and Financial Committee (of the Board of Governors of the International Monetary Fund) is incredibly bland, even by their usual standards. The degree of self-congratulation and complacency is slightly less pronounced than what we saw from the G20 in Pittsburgh, whose final statement contained a classic moment of hubris when the entirety of paragraph 5 read: “It worked.” Still, the IMFC (representing all IMF member countries) seems to be in the same cloud cuckoo land as the G20 leaders. This is not surprising, as the IMF appears to be increas

Pages