Today, more the two years after the official start of the recovery, we find ourselves mired in slow growth and high unemployment. The majority of Americans cannot distinguish between this recovery and stagnation, if not continued recession. One question is why the economy is performing so much worse than in the previous post-recessionary periods since World War Two. And once we think we have an answer to that question, we have another: What is to be done? Economics is the obvious place to turn for answers.
Senator Christopher Dodd obviously hasn't gotten over his doubts that the Senate would confirm Elizabeth Warren to head the new Consumer Financial Protection Bureau. According to the Wall Street Journal, Dodd recently approached Sheila Bair, head of the FDIC, to see if she might be interested in the job. She apparently said no thanks. The Journal notes that Dodd isn't the only Democrat nervous about Warren's prospects: Many Democrats feel they need someone in the post who won't be swayed by bankers. Others worry that choosing someone seen as too activist--a charge leveled at Ms.
Sources say that Goldman Sachs’s bonuses will be announced on Monday, January 18, and actually paid sometime between February 4 and February 7. In previous years, the bonuses were paid in early January--but the financial year shifted when Goldman became a bank holding company. For critics of the company and its fellow travelers, the timing could not be better. Anxiety levels about the financial sector are on the increase, even on Capitol Hill. The tension between high profits in banking and stress in the rest of the economy becomes increasingly a topic of discussion across the nation. And you
Looks like it passed with almost everything intact--consumer protection agency, resolution authority, systemic risk provisions, etc. The only thing that looks slightly ominous to my eyes is the derivatives piece.
As I've said before, I admire the Fed chairman's political touch, which he demonstrated again today by making a key concession to Fed critics and skeptics: Apparently Bernanke is now willing to share power for keeping an eye on systemic risk with a council of regulators. It's the kind of thing people like FDIC chairman Sheila Bair have proposed, so that the Fed doesn't end up cornering the market on financial regulatory authority. I just wonder if this is the right concession to make. For one thing, I'm not entirely sure how a council of regulators is supposed to work.
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
Bailouts of Fannie and Freddie could also turn a profit. Sheila Bair: Super-regulator would "benefit the largest banks and punish community ones." Vanity Fair profiles Hank Paulson. Flash orders come to an end at Nasdaq. The number of "decent jobs" will stay flat over the next decade. Study: Multi-taskers are slowed down by irrelevant information.
At the end of the day, CIT had nothing. Their asset quality was poor, their systemic risk implications seemed limited, Sheila Bair dug in her heels, and Jeffrey Peek (CEO) didn't have sufficiently strong connections to get her overruled. CIT had friends, but not enough--and maybe this tells us something about the shifting political sands. The Financial Services Roundtable (top financial CEOs) came out in force, the House Committee on Small Business reportedly made worried noises, and Barney Frank sounded supportive. But the American Bankers Association (the broader mass of bankers) publicly st
The issue of the day is obviously CIT. It's hard to sort out the real news from clever PR/planted stories in this situation, but it looks like the FDIC is coming out strongly against being involved in a rescue package. Given Sheila Bair's successful political positioning and strong popular appeal, it's hard to see how--once dug in--the FDIC can be moved. The lobbying frenzy has concentrated on CIT's role in financing small and medium-sized business; "the recession will be deeper if CIT fails" is the refrain. This is a weak argument--it would be straightforward to refinance this part of CIT's b
A few weeks ago I wondered how FDIC chairman Sheila Bair managed to retain/grab so much authority for her agency amid Obama's regulatory overhaul despite the fact that so many of her fellow regulators and senior members of Obama's economic team seemed to dislike her: The item was based on early reports about the administration's then-unreleased proposal--particularly the part about "resolution authority," which it looked like the FDIC was largely going to get. The Wall Street Journal ran a typical account here: The goal is to avoid repeating a situation akin to the collapse of Lehman Brothers