It's Never a Great Morning . . .
. . . when you (almost) agree with Krugman.
He is right about this:
The root of our current troubles lies in the debt American families ran up during the Bush-era housing bubble. Twenty years ago, the average American household’s debt was 83 ...
Over at the Agenda, Reihan Salam writes that Andy Kessler’s argument on why the Fed should pursue an alternative to its quantitative-easing program “seems sensible.” But Reihan still would like to hear other suggestions, “as the prospects of having ...
Chancellor Merkel isn’t just wrong about market “excesses” having caused the crisis. She could be wrong in various ways, depending on what she means by “crisis.”
A big reason for Ireland’s current sub-crisis is that in the fall ...
The Last Refuge of the Inept
Bank of America chief Brian Moynihan has taken up a distasteful habit: hiding behind his delinquent homeowners.
“I don’t think we should be put in a position where we aren’t trying to help homeowners through this strife because ...
“Shovel ready” was always a canard. It was more like “camera-ready” — and it was a cynical strategy that has gravely harmed the prospects for investment in critical physical assets.
Take high-speed rail. The president has used scarce stimulus funds not ...
California: Making Government
As recently as 2001, three major private-sector industries each outweighed California’s state and local government industry, as measured by the percentage of personal income that the workers in each field earn in the state.
In 2001, state and local government workers ...
Gross Has No Mortgage-Market Magic Bullet
Pimco bond manager Bill Gross stole the Treasury’s show at the Obama administration’s mortgage-fixing summit Tuesday.
Gross suggested that the White House give new four-percent fixed-rate mortgages to all Americans who are current on their home loans, including ...
Breaking News: Two Days Post-Finreg, Banks Still Too Big to Fail
On Wednesday, in signing the Dodd-Frank bill, President Obama said that the financial-regulation law would “put a stop to taxpayer bailouts once and for all.” In case you didn’t get the point, he repeated that “because of this law, ...
Dodd's Sudden Outbreak of Fin-Reg Honesty Continues
Senator Dodd offered some useful counsel yesterday about his fin-reg bill:
It will take the next economic crisis, as certainly it will come, to determine whether or not the provisions of this bill will actually provide this generation or the ...
Too Loathed to Fail, Part Two
Despite the president’s assertion yesterday, it is not in ”all our interests” for the government to help ensure that BP “remains” a “strong and viable” company.
Please read more over at City Journal.
Financial 'Reform,' Unless You Lend Money to a Too-Big-to-Fail State
The Senate passed financial “reform” last night. One willful omission in — or rather, not in — the bill shows how unserious Congress remains about ending “too big to fail.”
Earlier this week, New Hampshire’s Judd Gregg proposed an amendment to ...
But What Do They Really Think?
The story is 1,153 words, but the HTML coding says it all, no clicking required:
Tragedy, Statistics, and Markets
Thank you, Jonah, for your thoughts here. The Gulf has already been through so much in the past half-decade.
I wonder at fresh assertions, such as the Union Leader’s, that offshore drilling is “statistically extremely safe.” It may be ...
Re: Is Goldman Sachs Guilty of Fraud?
I apologize for breaking the radio silence on financial reform, but I listened to the debate between Will Cain and Andy McCarthy, and I’m with Will on this one.
Some Goldman Sachs supporters argue that in selling its “Abacus” ...
In Friday’s column, Paul Krugman says that Senate minority leader Mitch McConnell’s opposition to Sen. Chris Dodd’s financial-regulation bill is like “call[ing] for the abolition of municipal fire departments.”
Krugman asserts that McConnell opposes the Dodd ...
Arnold Kling wants Washington to “break up the banks.” Richard Vigilante and Andrew Redleaf want Washington to make the banks reveal all. But neither breaking banks up nor cracking them open would fix the financial system. Kling is right that ...
Re: The Sovereign-Debt Bubble
Sen. Chris Dodd’s fin-reg bill would make the sovereign-debt bubble worse. The bill would ban FDIC-insured banks and affiliates from some trading activities and would beef up capital rules for such activities at “non-banks” (like AIG). But it ...
That Buys a Lot of Doritos
Kathleen Grimm, the deputy schools chancellor in charge of deciding that it’s okay for New York City public-school children to sell Doritos to each other at fundraisers but not home-baked brownies, earned $196,574 cash salary in 2008, not including benefits.
Can we all blame Jonah for TARP?! This makes life easier.
More seriously, Rep. Paul Ryan’s justification for his pro-TARP vote would be perfectly reasonable — if the GOP wasn’t content to leave it at that.
To recap, Ryan ...
Commercial Banks' 'Safety Net'
In pushing “the Volcker rule,” the Obama administration has made a dismaying decision: to entrench further large commercial banks’ “too big to fail” status in the eyes of the markets.
In Senate testimony yesterday, former Federal Reserve chairman Paul Volcker ...
Why the Financial Industry Can't Pre-Fund Its Next Bailout
Would President Obama’s financial-industry tax be okay if Obama presented it as a sort of FDIC fund for high finance — that is, an industry-funded insurance pool into which “too big to fail” financial firms would pay to pre-fund their ...
Re: A Disappointing Jobs Report
I just have one point to add to everyone’s astute comments on the jobs data:
It’s not necessarily a wonderful thing that the financial-activities sector (banking, etc.) added 4,000 jobs, according to the preliminary report.
Washington has pumped so ...
President Obama hasn’t broken his campaign promise, just deferred it. To fold the Bush tax cuts into another grab-bag of unfocused short-term stimulus is eventually to sound the death knell of the tax cuts, and immediately to sound the ...
Europe’s structured-finance bailout fund — the European Financial Stability Facility (EFCF) — likely will issue bonds next month to fund the Irish rescue. Said one bond analyst about the new debt’s prospects in the marketplace (according to the FT):
Re: Conservatives, QE2, and 'Rejecting the Requiem'
The biggest risk with QE2 (in my view) is not runaway inflation. It’s that trying to push more money to the real economy through a still-broken financial system won’t work any better than it has so far.
Nevadans May Say: What Happens in Washington . . .
The 10/25 New Yorker has a piece on the Nevada Senate race between Majority Leader Harry Reid and Tea Party challenger Sharron Angle. In it, author Nicholas Lemann observes that “Nevadans are being presented with a great clash of ...
Tunneling Through the State Pension Burden
Bob Herbert is right. Building a tunnel should not be beyond the combined powers of the United States government and New Jersey. Chris Christie and U.S. Transportation Secretary Ray LaHood should find a way to get this thing built.
Re: The Cost of Promoting Home Ownership
Allowing Americans to “keep some $80 billion of their hard-earned income” is a terrific idea. But the home-mortgage tax deduction is not an effective way of accomplishing this goal, and damages the broader economy.
The government allows taxpayers to deduct mortgage-interest ...
Re: A Misleading Talking Point on Today’s Jobs Report
Agreed. To complement Stephen’s fine post: Even as state and local governments have lost 212,000 jobs over the past year, state and local job totals stand at 19.5 million. We’re still 1.6 million people, or 8.7 percent, above the figures from summer 2000.
British prime minister David Cameron, speaking yesterday at joint press conference with President Obama:
BP is an important company to both the British and the American economies. Thousands of jobs on both sides of the Atlantic depend on it. So ...
Now He Tells Us: Dodd's Belated Fin-Reg Wisdom
A couple of hours before the Senate narrowly passed the Dodd-Frank fin-reg bill today, Sen. Chris Dodd, one of the bill’s two namesakes, spoke some common sense on the Senate floor:
We can’t legislate wisdom or passion. We ...
Welcome back to 2008 (if we ever left). Just as in TARP’s early days, stock indices fluctuate wildly. Investors clumsily try to divine the next move — not of the millions of actors in a free-market economy, but of a few ...
As Senate Democrats Try to Vote, the GOP Should Ask: Whither Derivatives?
Senate Democrats are moving toward a vote on Sen. Chris Dodd’s financial-regulation bill without having ever presented a coherent position on the most important piece of financial reform: rules for derivatives.
Derivatives are just financial instruments whose value derives ...
Re: The IMF, the U.S., and Greece
It is good, though, that Congresswoman Rodgers is concerned about “bailout fatigue.” As a House Republican leader, perhaps she could ask her Senate counterparts — including Richard Shelby on the Banking Committee — why they have signed off on a flawed ...
Re: From the Trading Desk
Derb’s Wall Street “trader” writes in response to political and public anger at the financial industry:
Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we ...
Here’s the Times debate on “What Goldman’s [Alleged] Conduct Reveals,” in which I participated. Get it while it’s fresh!
Would the Dodd Bill Prevent Bailouts?
Treasury Secretary Tim Geithner said yesterday that the Dodd bill for financial regulatory reform does not institutionalize bailouts. “If a major institution manages itself to the edge of their abyss, we’re able to put them out of their misery, ...
Sen. Chris Dodd’s bill to fix financial regulations clocks in at 1,336 pages. By contrast, the draft for the 1933 Securities Act fit on one newspaper page. The draft for the Securities and Exchange Act of 1934 took up two (to be ...
Re: 'A Slap Upside the Head of the Government'
There’s a phrase for the phenomenon that Daniel described earlier today. When a corporation can issue debt at a cheaper rate than can its home government, it’s called “piercing the sovereign ceiling.”
Companies that “pierce the sovereign ceiling” ...
Hank Paulson, the Bush-era Treasury Secretary who spearheaded the 2008 bailouts, has an op-ed in the NYT today on how to fix finance. He’s got the right goal — ending too big to fail — but, like the Obama administration and Congress, ...
My Important Super Bowl Thoughts (Ha Ha, Kidding, Just AIG and Goldman)
I would rather do almost anything than watch football, including think about AIG. So, herewith:
The Times featured a good spread on the agreements between insurer AIG and investment firm Goldman Sachs that led to AIG’s September 2008 downfall and ...
Indelicate Questions . . .
President Obama promised today that “never again will the American taxpayer be held hostage by a bank that is ‘too big to fail.’”
To that end, he pledged to work with Congress to prohibit commercial banks, whose smaller depositors benefit ...
'We want our money back and we're going to get it'
“Getting our money back” from the bailed-out banks, as President Obama promised today, misses the point.
The “money” is but a fraction of the price the nation has paid for Washington’s failure to ensure that nominally private financial companies ...
Re: Big Trouble for Geithner?
A year ago, the Federal Reserve suppressed AIG’s attempt to release key information about the insurance giant’s $182 billion bailout, as Daniel wrote earlier.
The news, unfortunately, is no surprise. But Americans should try to sustain our shock at ...