Economy

Worth Reading
September 07, 2009

How did certain economists spot the bubble in advance?  WaPo: "90 percent of all new home loans are funded or guaranteed by taxpayers". UK was this close to shutting down troubled banks' ATMs during height of crisis. Recession may be ending, but credit crunch is still here. Better late than never? Greenspan says banks need higher capital requirements.

What Was Sheila Bair Getting At?
September 06, 2009

I'm coming a little late to Sheila Bair's intriguing Times op-ed from last week, but I think Tim Fernholz basically got it right over at The Prospect: Bair wasn't kvetching about the administration's regulatory proposals--the kind of thing that got her in Tim Geithner's crosshairs a few weeks back. She was taking aim at even more radical proposals for regulatory consolidation, like what Sen. Mark Warner lays out here.  Basically, the administration wants to fold the underwhelming Office of Thrift Supervision (OTS) into the Office of the Comptroller of the Currency--the two agencies that regula

The Times Calls Them 'Exotic.' I Call Them 'Ghoulish.' The Counting Houses Will Sell Investors Other Peoples' Life Insurance
September 06, 2009

It's big news. The top news in the Sunday Times, columns five and six right under the logo. No, the banks have not been chastened. And Jenny Anderson's article tells you just how little they have learned. This is a traffic in the odds of death. Or the odds on the proximity of death. Ms. Anderson has a very clear description: The bankers plan to buy 'life settlements,' life insurance policies that ill and elderly people sell for cash—$400,000 for a $1 million policy, say, depending on the life expectancy of the insured.

What to Like About the Geithner Plan
September 06, 2009

Treasury's proposal to increase capital requirements on banks around the world won't be loved by the financial sector, but the rest of us should give it strong consideration. There's little chance more capital would have prevented the crisis, but it would have made the ride down a lot less bumpy.

A Consumption Orgy That Wasn't
September 04, 2009

Matt Yglesias and Karl Smith question Bill Galston's claim that the 1980's to the mid-2000's was a period which saw an orgy of personal consumption. From large flat-screen TVs and i-phones to furniture and foreign cars, Americans spent as though there were no tomorrow, until tomorrow came. Galston bases his argument on the much repeated statistic that personal consumption is 70% of GDP.

Worth Reading
September 04, 2009

Loan losses are putting FHA reserves at risk. Track the economy with Google search trends. Banks should be charged for subsidies like deposit insurance. Can market-making and proprietary trading go hand in hand? Edmund Phelps on John Rawls and economic justice.

What Stands Out in the Jobs Report
September 04, 2009

Apologies for the light posting this week--I was working on a big piece that will be out soon. I'm going to take a longer look at the new job numbers before deciding if I stand by my ten-percent unemployment prediction. But, in the meantime, here are two nuggets that caught my eye: 1.) Commercial real estate continues to worry me a bit, and the jobs report flicks at the reason why: In August, construction employment declined by 65,000, in line with the trend since May. Monthly losses had averaged 117,000 over the 6 months ending in April.

Worth Reading
September 03, 2009

WSJ's Wessel: Taxing the rich more wouldn't hamper economy. The ratio of oil to natural gas prices is 4X the historical average. Krugman's essay on the failure of economics. Reactions from DeLong and Kling. Gillian Tett: Why did more bankers go to prison during S&L crisis than now? Why demand for healthcare shouldn't be suppressed. How can we prevent students from taking on too much debt?

Biden Gets Real
September 03, 2009

There was a lot of standard defense of Team Obama stimulus policy in Vice President Biden’s speech on the recovery act here at Brookings today.

Counter-counter CW: Job Losses Do Matter
September 03, 2009

Back in May, I wrote about recent research unearthing the fact that a substantial portion of the unemployment rate is driven not by job losses, but by slowdowns in hiring--a most counterintuitive result. The magnitude of this effect is the subject of some disagreement, but it would be fair to say that, on average, about 50-75% of the changes in the unemployment rate are caused by changes in the willingness of businesses to create new jobs. I, and others, have used this to suggest that during downturns the government should do more to get businesses hiring again.

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