Do the Fed's Rate Cuts Still Have Juice?
October 20, 2009

Jose Lopez at the San Francisco Fed takes a look at the Fed's power to influence a wide variety of market interest rates and finds that, despite improving economic conditions, the relationship between the fed funds rate (the rate the Fed controls) and other rates is still broken. The following chart from Lopez's analysis shows the pre- and post-crisis movements of the inflation-adjusted fed funds rate (blue line) and an indicator for 13 different market rates (red line): The disconcerting thing about this picture is that the gap between the funds rate and market rates is wider now than at any

Why is the Chamber of Commerce Refusing to Stand Up for Small Business?
October 20, 2009

On Warren Olney’s radio show To The Point yesterday, I had a chance to talk with U.S. Chamber of Commerce management directly regarding the issue posed here last week: Why would an organization representing 3 million small businesses come out in support of our largest banks? My question was picked up and focused by the host. Warren Olney (at the 36:35 mark): “Mr.

Charts of the Day: Global Income Inequality
October 20, 2009

An interesting set of some 40 charts depicting poverty levels, inequality, and income distributions covering 191 countries between 1970 and 2006 in a paper from MIT's Maxim Pinkovskiy and Columbia's Xavier Sala-i-Martin.

Worth Reading
October 19, 2009

Plenty more insider-trading charges could be coming. Dubner's response to Superfreakonomics criticism. Bernanke: China should spend more on healthcare. Fannie and Freddie are worth zilch. Charles Calomiris and Allan Meltzer on what to do about bank size. The booming underground sperm donation market.

Parsing the Final 2009 Deficit Numbers
October 19, 2009

If you follow this stuff, then you already know that the final, fiscal year 2009 deficit came in at $1.4 trillion, about $400 billion lower than what the administration projected back in May, and a little over $150 below where the administration thought it would be after its mid-session review (MSR) in August. As the newspaper write-ups all point out, lower-than-expected spending on the financial rescue accounts for a big chunk of the difference.

How the Recession is Killing Private Social Insurance
October 19, 2009

The Wall Street Journal has a terrific piece today about how the recession is accelerating the fraying the post-World War II compact between workers and employers (which has, of course, been fraying for several decades now). Key nugget: Two-thirds of big companies that cut health-care benefits don't plan to restore them to pre-recession levels, they recently told consulting firm Watson Wyatt.

Who Will Be the Next Carlos Slim?
October 18, 2009

The U.S. increasingly displays characteristics that we have seen many times in middle-income “emerging markets”--new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: Who exactly is going to dominate our economic and political landscape moving forward?  In most emerging markets, a major crisis means that some powerful people and their firms fall from grace.

Why the Fed Can't Do Consumer Regulation
October 18, 2009

Back in August I flagged an old Larry Summers lecture arguing that agencies (like the Fed) that keep an eye on bank safety and soundness shouldn't also be tasked with looking out for consumers, since the two mandates can conflict. Summers elaborated on this theme in a speech Friday at the Economist's "Buttonwood" conference: [A]ny regulatory agency that has as its primary mission the soundness and profitability of the banking system or the financial system cannot be relied on to pursue objectives that are potentially inconsistent with that overall mandate with sufficient vigor.

Re-Thinking the Mancession
October 17, 2009

Continuing Catherine Rampell's series charting the employment recession, here are some more graphs from a new paper by St. Louis Fed economists Kristie Engemann and Howard J. Wall.

How Goldman Can Rehabilitate Itself: Go Private
October 16, 2009

I have to say, I'm underwhelmed by the ideas the company is tossing around so far. Per this morning's Times piece: Goldman said Thursday that it would donate $200 million to its charitable foundation (that figure represents 6 percent of its third-quarter profit, or about six days of earnings). Rumors are swirling on Wall Street that Goldman might donate even more money to charity, perhaps as much as $1 billion, in an effort to defuse public resentment directed at the bank. Mr. Blankfein has even urged his free-spending bankers to be mindful of conspicuous consumption.