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?

Larry Summers Blogs (!) About Innovation
September 21, 2009

Last month I wrote a piece noting (a la Paul Krugman) that it was tough to see where growth would come from absent some technological breakthrough that attracted a wave of business investment. I went on to argue (not a la Krugman) that the imperative for such a breakthrough was so strong we might want to consider something as crude as industrial policy to expedite the process. At the time, I conceded that the White House appeared to be thinking along similar lines, if not quite as ambitiously as I'd prefer.

TNRtv: Obama's Insincere Agenda for the G20
September 21, 2009

Simon Johnson, professor at MIT's Sloan School of Management, senior fellow at the Peterson Institute for International Economics, and co-founder of, argues that the G20 this week offers unique and valuable opportunities to bring about significant financial reform on a global scale, but that the proposals currently on the table will not change much of anything. Check out the latest on TNRtv: Teixeira: Americans Want Baucuscare Bersin: We Will Not Even Consider Legalizing Drugs Chait/Foer: Why the GOP Has Gone Loony

Worst. Regulatory. Proposal. Ever.
September 21, 2009

It sounds like various Blue Dogs on the House Financial Services Committee aren't keen on the proposed consumers financial products agency. Their preferred alternative? A "council" of regulators to oversee consumer financial protection. Politico's Victoria McGrane has the details: Blue Dogs and other conservative Democrats — uneasy with a key element of President Barack Obama’s plan to regulate Wall Street — are rallying around an alternative proposal that scraps the consumer financial protection agency the president has been pushing. Rep.

U.S. Strategy for the G20: You Cannot Be Serious.
September 21, 2009

According to the WSJ this morning (top of p.A1), the U.S. is pushing hard for the G20 to adopt and implement a “Framework for Sustainable and Balanced Growth,” which would amount to the U.S.

Obama Embraces Aniston, Again
September 21, 2009

That would be the Jennifer Aniston theory of Obamaism, of course. A bit of back-story: After Frank Foer and I wrote a piece earlier this year laying out our theory of Obamaism, The Atlantic's Derek Thompson helpfully reimagined it as the Jennifer Aniston theory. As Thompson explained it in this post:  This is, in a nutshell, the theory that Obama prefers to tweak incentives for private actors rather than have the government take over.

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.

What Will Bernanke Do With His Second Term?
September 20, 2009

Ben Bernanke has a great opportunity to lead the reform of our financial system. His standing in Washington and on Wall Street is at an all-time high, as a result of his bailout/rescue efforts. He is about to be reappointed with acclaim for a second term as chairman of the Federal Reserve’s Board of Governors. And he has a lot to answer for. Look, for example, at his speech of May 17, 2007, which discusses some of the problems in the subprime market and contains the memorable line: “Importantly, we see no serious broader spillover to banks or thift institutions from problems in the subprime ma

Worth Reading
September 18, 2009

Should the FDIC tap banks or taxpayers for needed funds? WaPo: the FHA's reserves will soon drop below required levels. Megan McArdle puts chances of healthcare bill passing at 75%. Could criminal charges be filed in probe of BofA-Merrill deal? NYT banking reporter Eric Dash's view on problems with Wall St. pay. Reviews of business and economics news apps for the iPhone.