US Politics Obama Years Public date: 25.02.2019 20:17:58

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2 Oct 2010

The Campaign Disconnect

One in five American kids was living in poverty in 2009. Across the country, once solidly middle-class families are lining up at food pantries and soup kitchens for groceries or a hot meal. In New York City, a startling indicator of the continuing economic stress is the rise in the number of homes that don t have kitchens.
One in five American kids was living in poverty in 2009. Across the country, once solidly middle-class families are...

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1 Oct 2010

TARP Cost Will Be Less Than Once Thought

Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all the $700 billion lifeline to banks, insurance and auto companies will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.
Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all the $700...

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30 Sep 2010

A.I.G. and Government Agree on Exit Plan

The American International Group said Thursday that it had reached an agreement in principle to repay the Federal Reserve Bank of New York for the company s 2008 rescue, and to gradually return the ownership of its stock to the public markets.
The American International Group said Thursday that it had reached an agreement in principle to repay the Federal...

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28 Sep 2010

The New American Normal

On a weeklong visit, I found a mood of deep unease in an America that seems to have descended into tribalism not ethnic, but political, economic and social. Uncertainty is pervasive. The government s rescue of Wall Street combined with the acute difficulties of a middle class struggling to get by on stagnant or falling incomes has sharpened resentments.
On a weeklong visit, I found a mood of deep unease in an America that seems to have descended into tribalism not ethnic,...

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27 Sep 2010

Structure of Excuses

What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to be done, but workers aren t ready to do it they re in the wrong places, or they have the wrong skills. Our problems are structural, and will take many years to solve.
What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to...
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Reasons for Skepticism about structural unemployment

Unemployment has remained at 9.5%1 or above for more than a year, and may remain that high or inch even higher through the end of 2011. The predominant, and in our view correct, narrative to describe this situation has been that the bursting of the housing bubble and the resulting loss of wealth led to sharp cutbacks in consumer spending.
Unemployment has remained at 9.5%1 or above for more than a year, and may remain that high or inch even higher through...
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25 Sep 2010

Wall Street Extends Rally on Durable Goods Report

Wall Street continued its September rally and closed higher for a fourth week on Friday, with industrial and financial stocks climbing more than 2 percent after new statistics were interpreted as a sign the economy could be stabilizing.
Wall Street continued its September rally and closed higher for a fourth week on Friday, with industrial and financial...
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20 Sep 2010

The Angry Rich and Taxes

You see, the rich are different from you and me: they have more influence. It's partly a matter of campaign contributions, but it s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain - feel it much more acutely, it's clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.
You see, the rich are different from you and me: they have more influence. It's partly a matter of campaign...

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20 Sep 2010

How Obama Thinks

Barack Obama is the most antibusiness president in a generation, perhaps in American history. Thanks to him the era of big government is back. Obama runs up taxpayer debt not in the billions but in the trillions. He has expanded the federal government's control over home mortgages, investment banking, health care, autos and energy. The Weekly Standard summarizes Obama's approach as omnipotence at home, impotence abroad.
Barack Obama is the most antibusiness president in a generation, perhaps in American history. Thanks to him the era of...

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20 Sep 2010

The Rage of the Privileged Class As It Loses Its Privileges

Shortly after 1:30 on the afternoon of March 18, two dozen traders in AIG s financial-products division stepped away from their Bloomberg terminals and huddled around televisions to watch their boss, CEO Edward Liddy, testify before Congress. There was much at stake. These were the people who received the greater part of $165 million in retention bonuses that had suddenly become, to borrow a phrase, toxic.
Shortly after 1:30 on the afternoon of March 18, two dozen traders in AIG s financial-products division stepped away...

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20 Sep 2010

Wall Street’s Engines of Profit Are Slowing Down

Inside the great investment houses on Wall Street, business has taken a surprising turn downward. Even after taxpayer bailouts restored bankers profits and pay, the great Wall Street money machine is decelerating. Big financial institutions, including commercial banks, are still making a lot of money. But given unease in the financial markets and the economy, brokerages and investment banks are not making nearly as much as their executives, employees and investors had hoped.
Inside the great investment houses on Wall Street, business has taken a surprising turn downward. Even after taxpayer...

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20 Sep 2010

Older Unemployed Struggle to Rejoin the Work Force

Patricia Reid is not in her 70s, an age when many Americans continue to work. She is not even in her 60s. She is just 57. But four years after losing her job she cannot, in her darkest moments, escape a nagging thought: she may never work again. College educated, with a degree in business administration, she is experienced, having worked for two decades as an internal auditor and analyst at Boeing before losing that job.
Patricia Reid is not in her 70s, an age when many Americans continue to work. She is not even in her 60s. She is just...
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13 Sep 2010

China, Japan, America and the Renminbi

If discussion of Chinese currency policy seems confusing, it s only because many people don t want to face up to the stark, simple reality namely, that China is deliberately keeping its currency artificially weak. The consequences of this policy are also stark and simple: in effect, China is taxing imports while subsidizing exports, feeding a huge trade surplus. You may see claims that China s trade surplus has nothing to do with its currency policy; if so, that would be a first in world economic history. An undervalued currency always promotes trade surpluses, and China is no different.
If discussion of Chinese currency policy seems confusing, it s only because many people don t want to face up to the...

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12 Sep 2010

Schwarzman : It’s a War’ Between Obama, Wall St.

Schwarzman s original beef with Obama grew out of a 2008 campaign promise that "carried interest"- the compensation structure of private-equity-fund managers - would be taxed as ordinary income (35 percent) instead of capital gains (15 percent). Obama and many Democrats have argued that it s unfair for people like Schwarzman, with a net worth of about $8 billion, to pay taxes at a lower rate than their secretaries and chauffeurs. More substantively, the commissions and fees that hedge-fund managers reap (20 percent of their clients profits) are not, strictly speaking, capital gains because the managers themselves never held the stocks.
Schwarzman s original beef with Obama grew out of a 2008 campaign promise that "carried interest"- the compensation...
12 Sep 2010

Big business’s hypocritical country-club nonsense

It should hardly be a surprise that the business community is feeling a bit put upon these days. After all, it is coming off a glorious decade in which business lobbyists not only set the agenda for the White House and Congress but also headed many of the economic agencies and drafted the most important legislation and regulations. It is only now that the rest of us are having to clean up the mess left behind by this anti-tax and anti-regulatory orgy -- the enormous trade and budget deficits, the financial crisis, the environmental disasters, runaway health spending, and the widening gap between the rich and everyone else.
It should hardly be a surprise that the business community is feeling a bit put upon these days. After all, it is coming...
12 Sep 2010

Wht top %1 now earn one quarter of all income

In 1915, a statistician at the University of Wisconsin named Willford I. King published The Wealth and Income of the People of the United States, the most comprehensive study of its kind to date. The United States was displacing Great Britain as the world's wealthiest nation, but detailed information about its economy was not yet readily available; the federal government wouldn't start collecting such data in any systematic way until the 1930s. One of King's purposes was to reassure the public that all Americans were sharing in the country's newfound wealth.
In 1915, a statistician at the University of Wisconsin named Willford I. King published The Wealth and Income of the...

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3 Sep 2010

The Real Story

The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn t applied on a sufficient scale. And we need another round. I know that getting that round is unlikely: Republicans and conservative Democrats won t stand for it. And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.
The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it...

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30 Aug 2010

Greenspan disagrees with GOP: Tax cuts “do not” pay for themselves

Former Federal Reserve Chairman Alan Greenspan believes that the US should follow the law and let the Bush tax cuts lapse. He disagreed Sunday with Republicans who say that tax cuts pay for themselves. I am very much in favor of tax cuts but not with borrowed money, Greenspan said during an appearance on NBC. The problem that we ve gotten into in recent years is that spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous and my view is I don t think we can play subtle policy here, said Greenspan.
Former Federal Reserve Chairman Alan Greenspan believes that the US should follow the law and let the Bush tax cuts...

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27 Aug 2010

The Parent Model

During the first half of this year, German and American political leaders engaged in an epic debate. American leaders argued that the economic crisis was so bad, governments should borrow billions to stimulate growth. German leaders argued that a little short-term stimulus was sensible, but anything more was near-sighted. What was needed was not more debt, but measures to balance budgets and restore confidence.
During the first half of this year, German and American political leaders engaged in an epic debate. American leaders...

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27 Aug 2010

This Is Not a Recovery

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won t matter whether the G.D.P. numbers are slightly positive or slightly negative.
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent...
23 Aug 2010

The debate over expiring tax cuts, what about deficits?

As the economy begins to recover from the Great Recession, policymakers must confront the next fiscal challenge: the long-run federal deficit. Over the next ten years, the cumulative deficit is projected to exceed $10 trillion if current budget policies are continued. Addressing the deficit will require difficult and unpopular tradeoffs. Consider that in 2020 projected federal spending on Social Security, Medicare, Medicaid, defense, and interest on the debt will exceed 106 percent of 2020 tax revenues, according to the Congressional Budget Office. Clearly, balancing the budget will require either cutting these valued programs (to say nothing of the rest of federal spending) or tax increases.
As the economy begins to recover from the Great Recession, policymakers must confront the next fiscal challenge: the...

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23 Aug 2010

Bush Tax Cuts – Now That’s Rich

We need to pinch pennies these days. Don t you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy. But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country. What - you haven t heard about this proposal? Actually, you have: I m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent. Some background: Back in 2001, when the first set of Bush tax cuts was rammed through Congress, the legislation was written with a peculiar provision - namely, that the whole thing would expire, with tax rates reverting to 2000 levels, on the last day of 2010.
We need to pinch pennies these days. Don t you know we have a budget deficit? For months that has been the word from...

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20 Aug 2010

Appeasing the Bond Gods

As I look at what passes for responsible economic policy these days, there s an analogy that keeps passing through my mind. I know it s over the top, but here it is anyway: the policy elite - central bankers, finance ministers, politicians who pose as defenders of fiscal virtue - are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.
As I look at what passes for responsible economic policy these days, there s an analogy that keeps passing through my...

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18 Aug 2010

Really Unusually Uncertain

And as Mohamed El-Erian, the C.E.O. of Pimco, has been repeating, "Structural problems need structural solutions." There are no quick fixes. In America and Europe, we are going to need some big structural fixes to get back on a sustained growth path changes that will require a level of political consensus and sacrifice that has been sorely lacking in most countries up to now.
And as Mohamed El-Erian, the C.E.O. of Pimco, has been repeating, "Structural problems need structural solutions." There...

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16 Aug 2010

Attacking Social Security

Social Security s attackers claim that they re concerned about the program s financial future. But their math doesn t add up, and their hostility isn t really about dollars and cents. Instead, it s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.
Social Security s attackers claim that they re concerned about the program s financial future. But their math doesn t...

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9 Aug 2010

America Goes Dark

The lights are going out all over America literally. Colorado Springs has made headlines with its desperate attempt to save money by turning off a third of its streetlights, but similar things are either happening or being contemplated across the nation, from Philadelphia to Fresno.
The lights are going out all over America literally. Colorado Springs has made headlines with its desperate attempt to...

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8 Aug 2010

Welcome to the Recovery

THE devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth. The recession that began in late 2007 was extraordinarily severe, but the actions we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery.
THE devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs,...

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8 Aug 2010

Desperation Grows as Jobless Benefits Run Out

BRATTLEBORO, Vt. Facing eviction from her Tennessee apartment after several months of unpaid rent, Alexandra Jarrin packed up whatever she could fit into her two-door coupe recently and drove out of town. Enlarge This Image Matthew Cavanaugh for The New York Times Alexandra Jarrin, who is unemployed, worked on her job search and cared for her cat from a motel room in Brattleboro, Vt.  Ms. Jarrin, 49, wound up at a motel here, putting down $260 she had managed to scrape together from friends and from selling her living room set, enough for a weeklong stay. It was essentially all the money she had left after her unemployment benefits expired in March. Now she is facing a previously unimaginable situation for a woman who, not that long ago, had a corporate job near New York City and was enrolled in a graduate business school, whose sticker is still emblazoned on her back windshield
BRATTLEBORO, Vt. Facing eviction from her Tennessee apartment after several months of unpaid rent, Alexandra Jarrin...
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8 Aug 2010

Nation Lost 131,000 Jobs as Governments Cut Back

With the departure of thousands of temporary Census workers and thousands more let go by state and local governments, businesses could not rescue the American labor market in July.
With the departure of thousands of temporary Census workers and thousands more let go by state and local governments,...
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2 Aug 2010

Defining Prosperity Down

Well, if Congress won t act, what about the Federal Reserve? The Fed, after all, is supposed to pursue two goals: full employment and price stability, usually defined in practice as an inflation rate of about 2 percent. Since unemployment is very high and inflation well below target, you might expect the Fed to be taking aggressive action to boost the economy. But it isn t.
Well, if Congress won t act, what about the Federal Reserve? The Fed, after all, is supposed to pursue two goals: full...

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19 Jul 2010

The Pundit Delusion

The best way for Mr. Obama to have avoided an electoral setback this fall would have been enacting a stimulus that matched the scale of the economic crisis. Obviously, he didn t do that. Maybe he couldn t have passed an adequate-sized plan, but the fact is that he didn t even try. True, senior economic officials reportedly downplayed the need for a really big effort, in effect overruling their staff; but it s also clear that political advisers believed that a smaller package would get more friendly headlines, and that the administration would look better if it won its first big Congressional test.
The best way for Mr. Obama to have avoided an electoral setback this fall would have been enacting a stimulus that...

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17 Jul 2010

From S.E.C. and Goldman, Generals Ended the War

LAST Wednesday at around 3 p.m., the Securities and Exchange Commission and Goldman Sachs settled an epic, seismic battle one waged over whether the storied investment bank defrauded investors in a transaction that regulators said Goldman had built to self-destruct.
LAST Wednesday at around 3 p.m., the Securities and Exchange Commission and Goldman Sachs settled an epic, seismic...

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16 Jul 2010

Redo That Voodoo

For a while, leading Republicans posed as stern foes of federal red ink. Two weeks ago, in the official G.O.P. response to President Obama s weekly radio address, Senator Saxby Chambliss devoted his entire time to the evils of government debt, one of the most dangerous threats confronting America today. He went on, At some point we have to say enough is enough. But this past Monday Jon Kyl of Arizona, the second-ranking Republican in the Senate, was asked the obvious question: if deficits are so worrisome, what about the budgetary cost of extending the Bush tax cuts for the wealthy, which the Obama administration wants to let expire but Republicans want to make permanent? What should replace $650 billion or more in lost revenue over the next decade?
For a while, leading Republicans posed as stern foes of federal red ink. Two weeks ago, in the official G.O.P. response...

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9 Jul 2010

Pity the Poor C.E.O.

Historically, there has been a close relationship between the level of business investment and the 'output gap,' the difference between the economy s actual output and its long-run trend - which means that there s nothing surprising about low investment now, given the fact that the output gap is hugely negative. If anything, it s surprising how well business investment has been holding up.
Historically, there has been a close relationship between the level of business investment and the 'output gap,' the...

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7 Jul 2010

Cap on Bank Bonuses Clears Hurdle in Europe

As Wall Street drags its feet on reining in bonuses, the European Union is forcing its banks by law to show some self-restraint. The European Parliament on Wednesday approved one of the world s strictest crackdowns on exorbitant bank pay, going beyond some of the limits that many banks were pressed to adopt in the wake of the financial crisis.
As Wall Street drags its feet on reining in bonuses, the European Union is forcing its banks by law to show some...

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5 Jul 2010

Ron Paul’s Audit the Fed Fails 229-198

Ron Paul s attempt to audit the Federal Reserve, which was previously co-sponsored by 320 members of the House (HR 1207), failed by a vote of 229-198. All Republicans voted in favor of the measure with 23 Democrats crossing the aisle to vote with Republicans. 114 co-sponsors of HR 1207, all Democrats, jumped ship and voted against Audit the Fed
Ron Paul s attempt to audit the Federal Reserve, which was previously co-sponsored by 320 members of the House (HR...

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1 Jul 2010

Panel Questions Pricing Role of Goldman and A.I.G.

The Financial Crisis Inquiry Commission is investigating Goldman s relationship with the American International Group in a two-day hearing, as part of its broader study of the causes of the financial crisis. For more than a year before the government bailed out A.I.G., Goldman demanded cash from the insurer, based on Goldman s lower valuations of mortgage securities. A.I.G. battled Goldman in an epic dispute but ultimately surrendered and sent much of the requested money.
The Financial Crisis Inquiry Commission is investigating Goldman s relationship with the American International Group in...

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25 Jun 2010

The Renminbi Runaround

China s exchange-rate policy is neither complicated nor unprecedented, except for its sheer scale. It s a classic example of a government keeping the foreign-currency value of its money artificially low by selling its own currency and buying foreign currency. This policy is especially effective in China s case because there are legal restrictions on the movement of funds both into and out of the country, allowing government intervention to dominate the currency market.
China s exchange-rate policy is neither complicated nor unprecedented, except for its sheer scale. It s a classic...

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24 Jun 2010

Private Equity Firms Have Billions and Nowhere to Spend It

Private equity firms, where corporate takeovers are planned and plotted, today sit atop an estimated $500 billion. But the deal makers are desperate to find deals worth doing, and the clock is ticking. The stores of money inside the private equity industry have ramifications far beyond the bid- em-up crowd on Wall Street. Millions of Americans - investors, employees, retirees - have a stake in the game too.
Private equity firms, where corporate takeovers are planned and plotted, today sit atop an estimated $500 billion. But...

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18 Jun 2010

That ’30s Feeling

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s. Many economists, myself included, regard this turn to austerity as a huge mistake.
Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling...

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13 Jun 2010

Growth Policy versus Stabilization Policy

One question concerns stabilization policy -- keeping the economy as close as possible to the long-run growth path -- and the other is growth policy, i.e. policy that attempts to maximize the long-run growth rate. (There is also work on whether stability and growth are related. More stable economies could grow faster due to reduced uncertainty, but government intervention to stabilize the economy could also stifle growth according to some models, so the relationship is not clear a priori. In modern models, these are not strictly separable, but it is still a useful way to think about policy conceptually)
One question concerns stabilization policy -- keeping the economy as close as possible to the long-run growth path --...

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13 Jun 2010

How Should We Respond to Regulatory Failure

If there is a lot of crime that should have been prevented but wasn't, do we disband the police department or try to figure out how to make it better? It would be silly to suggest that the answer to the failure to prevent crimes is to get rid of the police, and it's equally silly to assert that the solution to poor regulation is to quit trying to regulate.
If there is a lot of crime that should have been prevented but wasn't, do we disband the police department or try to...
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13 Jun 2010

Do Census Jobs Count

Do Census Jobs Count?: When writing about the recent employment report, most analysts and reporters focused on the number of private sector jobs created in the previous month, only 20,000, while netting out the 411,000 temporary jobs created by the Census. Does that mean the temporary Census jobs don't count? It depends upon the question that is being asked, but yes, these jobs do matter.
Do Census Jobs Count?: When writing about the recent employment report, most analysts and reporters focused on the...

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13 Jun 2010

Strange Arguments For Higher Rates

Strange Arguments For Higher Rates, by Paul Krugman: So Raghuram Rajan has posted a further explanation of his case for raising interest rates in the face of very high unemployment, presumably a response to Mark Thoma. It s good to see Rajan put his cards on the table but what he says only further confirms my sense that we re talking about some kind of psychological desire to be tough...
Strange Arguments For Higher Rates, by Paul Krugman: So Raghuram Rajan has posted a further explanation of his case for...
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9 Jun 2010

Bernanke Warns of ‘Unsustainable’ Debt

WASHINGTON - The chairman of the Federal Reserve, Ben S. Bernanke, warned on Wednesday that "the federal budget appears to be on an unsustainable path," but also recognized that the "exceptional increase" in the deficit had been necessary to ease the recession.
WASHINGTON - The chairman of the Federal Reserve, Ben S. Bernanke, warned on Wednesday that "the federal budget appears...

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5 Jun 2010

Stocks lose 3% following bad May jobs report, more European debt troubles

Stocks dove in a massive sell-off in the last hour of trading, hitting their lowest levels since February. Wall Street responded to a discouraging May jobs report and more European debt troubles, raising concerns about a double-dip recession. The Dow closed down 3.2 percent at 9,931.37, breaking 10,000. The Dow lost more than 300 points on the day. The index is off 12.5 percent from its April high and all 30 Dow stocks were down today. The Dow closed down 2.3 percent for the week.
Stocks dove in a massive sell-off in the last hour of trading, hitting their lowest levels since February. Wall Street...
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24 May 2010

The new order is chaos

I saw a wonderful cartoon this week, which had two kids (one of whom is holding a needle close to a balloon) approaching a balding middle-aged man reading one of the financial newspapers, with the caption "Watch him jump". Replace the adolescents with today's politicians (actually scratch that, most politicians are still adolescent at least as far as their mental growth is concerned) and the balloon as burst; you have the perfect picture of what happened in the markets.
I saw a wonderful cartoon this week, which had two kids (one of whom is holding a needle close to a balloon) approaching...

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21 May 2010

Lost Decade Looming

For the past few months, much commentary on the economy some of it posing as reporting has had one central theme: policy makers are doing too much. Governments need to stop spending, we re told. Greece is held up as a cautionary tale, and every uptick in the interest rate on U.S. government bonds is treated as an indication that markets are turning on America over its deficits. Meanwhile, there are continual warnings that inflation is just around the corner, and that the Fed needs to pull back from its efforts to support the economy and get started on its exit strategy, tightening credit by selling off assets and raising interest rates
For the past few months, much commentary on the economy some of it posing as reporting has had one central theme: policy...

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21 May 2010

Senate Passes Financial Overhaul Bill

WASHINGTON The Senate on Thursday approved a far-reaching financial regulatory bill, putting Congress on the brink of approving a broad expansion of government oversight of the increasingly complex banking system and financial markets.
WASHINGTON The Senate on Thursday approved a far-reaching financial regulatory bill, putting Congress on the brink of...

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19 May 2010

Senate Fails to Advance Financial Reform Bill

The Senate on Wednesday rejected an effort by Democratic leaders to complete work on a sweeping financial regulatory bill as two key Democratic holdouts said it still did not sufficiently tighten rules on Wall Street.
The Senate on Wednesday rejected an effort by Democratic leaders to complete work on a sweeping financial regulatory...

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17 May 2010

The Great Consolidation of Power

This feels like a populist moment. Americans are Tea Partying. Greeks are rioting. Incumbents are being thrown out; the Federal Reserve is facing an audit; Goldman Sachs is facing prosecution. In Kentucky, Ron Paul s son might be about to win a Republican Senate primary.
This feels like a populist moment. Americans are Tea Partying. Greeks are rioting. Incumbents are being thrown out; the...
17 May 2010

Goldman Sachs Publicly Backs Financial Reform – While Dispatching Army of Lobbyists

For all of Goldman Sachs professed support for an overhaul of financial regulations, the megabank hasn t exactly withdrawn its army of lobbyists. Far from wearing out its welcome, the firm is busier than ever safeguarding its interests while a Wall Street crackdown takes shape in Washington.
For all of Goldman Sachs professed support for an overhaul of financial regulations, the megabank hasn t exactly...

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15 May 2010

We’re Not Greece

It s an ill wind that blows nobody good, and the crisis in Greece is making some people people who opposed health care reform and are itching for an excuse to dismantle Social Security very, very happy. Everywhere you look there are editorials and commentaries, some posing as objective reporting, asserting that Greece today will be America tomorrow unless we abandon all that nonsense about taking care of those in need.
It s an ill wind that blows nobody good, and the crisis in Greece is making some people people who opposed health care...

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29 Apr 2010

GOP abandons blockade of banking regulation bill

WASHINGTON Days of high-decibel partisanship yielded to slightly more subdued accusations as the Senate lurched into action Thursday on legislation reining in Wall Street and risky investments that nearly wrecked the economy in 2008.
WASHINGTON Days of high-decibel partisanship yielded to slightly more subdued accusations as the Senate lurched into...

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28 Apr 2010

Not us Goldman execs deny wrongdoing in crisis

WASHINGTON Defending his company under blistering criticism, the CEO of Goldman Sachs testily told skeptical senators Tuesday that customers who bought securities from the Wall Street giant in the run-up to a national financial crisis came looking for risk "and that's what they got."
WASHINGTON Defending his company under blistering criticism, the CEO of Goldman Sachs testily told skeptical senators...
27 Apr 2010

Goldman Sachs’s business model contradicts the public interest at every turn.

Goldman Sachs, not that long ago, was a firm that raised capital for companies who wished to grow and advised companies that wanted to buy another company or sell themselves to another company. These are now minor sidelines for Goldman. The overwhelmingly large portion of its revenues and profits come from trading. And to be clear, this is not brokerage whereby a firm executes trades on behalf of someone else. This is trading on its own account for its own benefit.
Goldman Sachs, not that long ago, was a firm that raised capital for companies who wished to grow and advised companies...

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27 Apr 2010

Democrats push bank controls; GOP delays action

WASHINGTON Undaunted by a Senate setback, Democrats appeared increasingly confident Monday they will be able to take advantage of Americans' anger at Wall Street and push through the most sweeping new controls on financial institutions since the Great Depression.
WASHINGTON Undaunted by a Senate setback, Democrats appeared increasingly confident Monday they will be able to take...

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26 Apr 2010

Berating the Rating Agencies

Let s hear it for the Senate s Permanent Subcommittee on Investigations. Its work on the financial crisis is increasingly looking like the 21st-century version of the Pecora hearings, which helped usher in New Deal-era financial regulation. In the past few days scandalous Wall Street e-mail messages released by the subcommittee have made headlines.
Let s hear it for the Senate s Permanent Subcommittee on Investigations. Its work on the financial crisis is...

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26 Apr 2010

Democrats Closing Ranks on Finance Reform

WASHINGTON Senate Democrats said Sunday that they had bridged internal party differences and coalesced around a plan to tighten regulation of derivatives, the complex financial instruments that were a major factor in the 2008 economic crisis.
WASHINGTON Senate Democrats said Sunday that they had bridged internal party differences and coalesced around a plan to...

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26 Apr 2010

World Bank members agree to raise capital

US Treasury secretary Timothy Geithner has said that World Bank members have agreed to two new developments. They will raise extra capital and give more of a voice on running the organisation to developing countries. Mr Geithner said the Bank had made a "strong and compelling case" for a funding increase of $3.5bn ( 2.3bn). He said the money was needed to help Afghanistan to develop more productive farming and for relief efforts, such as that currently underway in Haiti.
US Treasury secretary Timothy Geithner has said that World Bank members have agreed to two new developments. They will...

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25 Apr 2010

Fight On, Goldman Sachs!

When the Goldman Sachs chief executive made that tone-deaf remark to an interviewer in November, he became the butt of a million insults, the ultimate symbol of Wall Street s abdication of responsibility for its sleazy role in the Great Crash of 08. But now we ve learned that Blankfein was actually, if inadvertently, on the side of the angels. It s his myopic, unrepentant truculence that left Goldman exposed to a Securities and Exchange Commission accusation of fraud that will be litigated in public rather than bought off in private. And it s that S.E.C. legal action that has, in a single week, radically transformed the politics and prospects for financial reform in America.
When the Goldman Sachs chief executive made that tone-deaf remark to an interviewer in November, he became the butt of a...

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25 Apr 2010

Distrust, Discontent, Anger and Partisan Rancor

Rather than an activist government to deal with the nation s top problems, the public now wants government reformed and growing numbers want its power curtailed. With the exception of greater regulation of major financial institutions, there is less of an appetite for government solutions to the nation s problems including more government control over the economy than there was when Barack Obama first took office.
Rather than an activist government to deal with the nation s top problems, the public now wants government reformed and...
25 Apr 2010

Inside Job – Betting against the American Dream

A Radio show by Ira Glass: A hedge fund named Magnetar comes up with an elaborate plan to make money. It sponsors the creation of complicated and ultimately toxic financial securities... while at the same time betting against the very securities it helped create. Planet Money's Alex Blumberg teams up with two investigative reporters from ProPublica, Jake Bernstein and Jesse Eisinger, to tell the story. Jake and Jesse pored through thousands of pages of documents and interviewed dozens of Wall Street Insiders. We bring you the result: a tale of intrigue and questionable behavior, which parallels quite closely the plot of a Mel Brooks musical.
A Radio show by Ira Glass: A hedge fund named Magnetar comes up with an elaborate plan to make money. It sponsors the...

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25 Apr 2010

Financial reform First, define the problem

I HAVE been meaning to summarise my thoughts on financial regulatory reform in the wake of the Hyman Minsky conference on same. I have to say, it has left me with a sense of resigned cycnicism. I'll get to details in a moment, but I think that the most important thing to understand about financial reform is that its dynamics are simply too complicated to lend themselves to good policy. As Paul Krugman said during his talk on Thursday, financial reform is totally different from health care reform. There the crises are clear coverage and costs and the policy positions were clearly defined and coherent. On financial reform, no one really agrees about anything. If you were to sit down a group of progressive economists and ask them about health care, they'd all say more or less the same thing. Ask them about financial reform, on the other hand, and you're likely to get wildly different answers. No one can agree on the underlying causes of this latest crisis, or on why the world managed to avoid crises in the postwar decades, or on what steps should be taken to make financial systems more secure. While I think there are good regulatory ideas out there, I'm increasingly of the opinion that if the bill that passes ends up being an effective change to the regulatory environment, it will mainly be by accident.
I HAVE been meaning to summarise my thoughts on financial regulatory reform in the wake of the Hyman Minsky conference...

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24 Apr 2010

Goldman’s CEO and board are named in lawsuit

NEW YORK Goldman Sachs's CEO and other top officers are accused in a pair of shareholder lawsuits of lax oversight in deals involving risky mortage-backed securities that later went bad. The lawsuits filed Thursday in New York State Supreme Court name Lloyd Blankfein and the firm's entire board of directors as defendants.
NEW YORK Goldman Sachs's CEO and other top officers are accused in a pair of shareholder lawsuits of lax oversight in...

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22 Apr 2010

Economist’s View Why Did Bad Bonds Get Good Ratings

When I was asked what was missing from the proposed financial reform legislation, I should have mentioned the lack of effective reform measures for ratings agencies, particularly the incentive to provide high ratings to encourage future business. As noted below, part of the reform legislation is directed at the ratings agencies, but it doesn't get at the main problem, which is the incentive to tell its customers what they want to hear, i.e. the incentive to deliver higher ratings than deserved. For some reason ($$$???), the ratings agencies seem to be escaping the legislative and regulatory attention they ought to be receiving:
When I was asked what was missing from the proposed financial reform legislation, I should have mentioned the lack of...
20 Apr 2010

You’re Welcome, Wall Street

The easiest and most profitable risk-adjusted trade available for the banks is to borrow billions from the Fed at a cost of around half a percentage point and then to lend the money back to the U.S. Treasury at yields of around 3 percent, or higher, a moment later. The imbedded profit of some 2.5 percentage points is an outright and ongoing gift from American taxpayers to Wall Street.
The easiest and most profitable risk-adjusted trade available for the banks is to borrow billions from the Fed at a cost...

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20 Apr 2010

Lehman Examiner Criticizes S.E.C. Oversight

WASHINGTON The court-appointed examiner who dissected the Lehman Brothers bankruptcy is expected to criticize the Securities and Exchange Commission on Tuesday for its decision to stand by idly as the investment bank veered toward collapse. The S.E.C. knew that Lehman did not have adequate liquidity and had exceeded its own limits on risk-taking but in essence did nothing, the examiner, Anton R. Valukas, will say in testimony released in advance by the House Financial Services Committee.
WASHINGTON The court-appointed examiner who dissected the Lehman Brothers bankruptcy is expected to criticize the...

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19 Apr 2010

Looters in Loafers

Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb 'sacks,' as in looting and pillaging. The student replies, 'Goldman Sachs.' Sure enough, last week the Securities and Exchange Commission accused the Gucci-loafer guys at Goldman of engaging in what amounts to white-collar looting. I m using the term looting in the sense defined by the economists George Akerlof and Paul Romer in a 1993 paper titled Looting: The Economic Underworld of Bankruptcy for Profit. That paper, written in the aftermath of the savings-and-loan crisis of the Reagan years, argued that many of the losses in that crisis were the result of deliberate fraud.
Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb...

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4 Apr 2010

Start-Ups, Not Bailouts

Here s my fun fact for the day, provided courtesy of Robert Litan, who directs research at the Kauffman Foundation, which specializes in promoting innovation in America: Between 1980 and 2005, virtually all net new jobs created in the U.S. were created by firms that were 5 years old or less, said Litan. That is about 40 million jobs. That means the established firms created no new net jobs during that period.
Here s my fun fact for the day, provided courtesy of Robert Litan, who directs research at the Kauffman Foundation,...
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4 Apr 2010

The Pay at the Top

The compensation research firm Equilar compiled data reflecting pay for 200 chief executives at 199 public companies that filed their annual proxies by March 27 and had revenue of at least $6.3 billion. (One company, Motorola, had co-C.E.O. s.)
The compensation research firm Equilar compiled data reflecting pay for 200 chief executives at 199 public companies...

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2 Apr 2010

Financial Reform 101

Let s face it: Financial reform is a hard issue to follow. It s not like health reform, which was fairly straightforward once you cut through the nonsense. Reasonable people can and do disagree about exactly what we should do to avert another banking crisis.
Let s face it: Financial reform is a hard issue to follow. It s not like health reform, which was fairly straightforward...

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21 Mar 2010

Obama, Lehman and ‘The Dragon Tattoo’

"A bank director who blows millions on foolhardy speculations should not keep his job, "writes Larsson in one typical passage. "A managing director who plays shell company games should do time." Larsson is no less lacerating about influential journalists who treat "mediocre financial whelps like rock stars" and who docilely "regurgitate the statements issued by C.E.O.'s and stock-market speculators."
"A bank director who blows millions on foolhardy speculations should not keep his job, "writes Larsson in one typical...

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16 Mar 2010

Taking On China and Its Currency

Most of the world s large economies are stuck in a liquidity trap deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can t offset.
Most of the world s large economies are stuck in a liquidity trap deeply depressed, but unable to generate a recovery by...

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6 Mar 2010

Merkel No financial help for Greece

BERLIN German Chancellor Angela Merkel has avoided giving debt-plagued Greece a commitment of financial assistance, as Athens was rattled by more strikes and violent protests by unions outraged by harsh economic austerity measures.
BERLIN German Chancellor Angela Merkel has avoided giving debt-plagued Greece a commitment of financial assistance, as...

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5 Mar 2010

Senator Bunning’s Universe

So the Bunning blockade is over. For days, Senator Jim Bunning of Kentucky exploited Senate rules to block a one-month extension of unemployment benefits. In the end, he gave in, although not soon enough to prevent an interruption of payments to around 100,000 workers.
So the Bunning blockade is over. For days, Senator Jim Bunning of Kentucky exploited Senate rules to block a one-month...

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25 Feb 2010

Trades in Greek Debt Add to Country’s Financing Burden

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers. These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit
Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance...
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22 Feb 2010

The Bankruptcy Boys

ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government "down to the size where we can drown it in the bathtub. "
ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the...

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16 Feb 2010

The Lean Years

The U.S. will have to produce 10 million new jobs just to get back to the unemployment levels of 2007. There s no sign that that is going to happen soon, so we re looking at an extended period of above 8 percent unemployment. The biggest impact is on men. Over the past few decades, men have lagged behind women in acquiring education and skills. According to the Bureau of Labor Statistics, at age 22, 185 women have graduated from college for every 100 men who have done so. Furthermore, men are concentrated in industries where employment is declining (manufacturing) or highly cyclical (construction).
The U.S. will have to produce 10 million new jobs just to get back to the unemployment levels of 2007. There s no sign...
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9 Feb 2010

The World’s Watchmaker

Leung was wearing a great hulk of a watch called a Bonja. It s big in Gulf states, where it retails for about $4,000. Leung told me he s paid $200 for this model and that leaves him a comfortable margin. For Juicy Couture watches that retail in New York for $95, he gets eight dollars. He s still making money on that. In general he receives about 8 percent of the retail price, or about 40 bucks for a $495 Lacoste watch.
Leung was wearing a great hulk of a watch called a Bonja. It s big in Gulf states, where it retails for about $4,000....

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8 Feb 2010

In a Message to Democrats, Wall St. Sends Cash to G.O.P

But this year Chase s political action committee is sending the Democrats a pointed message. While it has contributed to some individual Democrats and state organizations, it has rebuffed solicitations from the national Democratic House and Senate campaign committees. Instead, it gave $30,000 to their Republican counterparts. The shift reflects the hard political edge to the industry s campaign to thwart Mr. Obama s proposals for tighter financial regulations.
But this year Chase s political action committee is sending the Democrats a pointed message. While it has contributed to...

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5 Feb 2010

Fiscal Scare Tactics

These days it s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren t stated as opinions, as views held by some analysts but disputed by others. Instead, they re reported as if they were facts, plain and simple.
These days it s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the...
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4 Feb 2010

Florida, We Have a Problem

In Washington, this is always a time of innocent hope, when earnest budgeteers look for unnecessary programs to ax so they can prove to the country that government is efficient. This year, the Department of Education wins the fiscal tidiness award, having proposed to eliminate seven programs, consolidate 38 others and wipe out $123 million in earmarks.
In Washington, this is always a time of innocent hope, when earnest budgeteers look for unnecessary programs to ax so...
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31 Jan 2010

The State of the Union Is Comatose

Yes, the Republicans were correct to laugh at one of the president s own gimmicks on Wednesday night: a symbolic and pointless spending freeze. But their own alternatives are downright hilarious. When the G.O.P. House leadership last year announced its plan to cut federal spending by $75 billion annually, it enumerated specific new cuts of only $5 billion per year. A tax-cut-laden stimulus plan endorsed by Jim DeMint, the South Carolina senator and Tea Party hero, would cost more than $3 trillion more than triple the cost of Obama s stimulus over the next decade, in the estimate of Jonathan Chait of The New Republic.
Yes, the Republicans were correct to laugh at one of the president s own gimmicks on Wednesday night: a symbolic and...

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29 Jan 2010

March of the Peacocks

In the long run, however, even the U.S. government has to pay its way. And the long-run budget outlook was dire even before the recent surge in the deficit, mainly because of inexorably rising health care costs. Looking ahead, we re going to have to find a way to run smaller, not larger, deficits.
In the long run, however, even the U.S. government has to pay its way. And the long-run budget outlook was dire even...

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28 Jan 2010

For Wall Street, Tough Talk, but Weak Reforms

It s worth reminding ourselves that this latest nearly catastrophic financial crisis as Treasury secretary Tim Geithner referred to it today during his Congressional testimony related to the A.I.G. bailout was not caused by Wall Street s proprietary trading nor by its private equity funds nor by a hedge fund owned in whole or in part by a depository institution. This crisis was caused by a host of others reasons: among them, homeowners who took out mortgages they were unlikely to pay back; Wall Street securities firms that bought those mortgages and re-packaged them as securities and then sold them off to investors worldwide; ratings agencies that were paid to rate these securities AAA even though they weren t; and regulators who either turned a blind-eye to Wall Street s miscreant behavior either because they were underpaid and overworked or simply because one day they hoped to work at the firms they were regulating.
It s worth reminding ourselves that this latest nearly catastrophic financial crisis as Treasury secretary Tim Geithner...

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25 Jan 2010

The Bernanke Conundrum

A Republican won in Massachusetts and suddenly it s not clear whether the Senate will confirm Ben Bernanke for a second term as Federal Reserve chairman. That s not as strange as it sounds: Washington has suddenly noticed public rage over economic policies that bailed out big banks but failed to create jobs. And Mr. Bernanke has become a symbol of those policies.
A Republican won in Massachusetts and suddenly it s not clear whether the Senate will confirm Ben Bernanke for a second...
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