Archive for March, 2009

Latest Geithner/Obama plan

Sunday, March 22nd, 2009

Various economists (Paul Krugman, Dean Baker & the blog Calculated Risk) are unimpressed with the Obama Administration’s plan for dealing with the economic crisis. YouTube asks “Hey, Paul Krugman, where are you?” (Post also includes links to other issue-oriented tunes). And bleah! Don’t even bother looking to the traditional media for answers about the economy.
Complete waste of time, speaking of which, the Inky made a stab at rousing the rabble at Obama’s economic plan. Article speaks of sidewalk corners being cut so as to make them wheelchair accessible. Obviously, the bill that directs these corner cuts could have been better written. Not all the corners get much traffic and very frequently there are no sidewalks to go along with the corner cuts. Article drags in the totally-unconnected problem of Route 202 and how that needs to be widened.
Economists View blog rounds up the opinions of many good economists on the Geithner/Obama plan. Again, not very impressed.

Examination of economic crisis

Monday, March 16th, 2009

Wall Street Watch puts out a 3 megabyte, 231 page PDF of a report on just what produced the economic situation of today. Summary of 12 main events:

  1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
  2. Regulatory rules permitted off-balance sheet accounting — tricks that enabled banks to hide their liabilities.
  3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives — which became the basis for massive speculation.
  4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
  5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
  6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal “risk-assessment models.”
  7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
  8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
  9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
  10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
  11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
  12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.

Both Democrats and Republicans were responsible for the meltdown, but remember, deregulation is a specifically Republican idea. If Democrats did it, they did so specifically to establish their “serious person” bonafides.

Republicans having a “Pre-Recession Mindset?”

Saturday, March 7th, 2009

Democrats were accused (falsely) of having a pre-9/11 mindset. Are Republicans looking at the world with a “pre-recession mindset?”

The evidence is pretty compelling that the opposition party just doesn’t comprehend¬† the economic trouble the US is in.

What are we left with? Republicans are pushing the same tax cuts they wanted before the recession. They’re making the same arguments about spending they offered before the recession. They’re engaged in the same petty games they enjoyed before the recession. In the midst of “an all-hands-on-deck emergency that’s as trying as war,” and in “the throes of a catastrophic economic crisis,” the failed minority party, ignoring the election results, public opinion, and everything we know about economics, have the same approach to the economy that they had at this point a year ago. And the year before that. And the year before that.

And BTW, there are indeed people who think our president is failing to fix the economy in a timely manner. Only 2% of Americans share this view. The great majority have more patience.

Jon Stewart of The Daily Show does an absolutely classic smackdown of the financial channel CNBC. The takeaway from this is that the financial advice you get from these guys is about as good as what you’ll get from any good astrologer or standard political pundit.

Economist Dean Baker agrees with Stewart. The ups and downs of the stock market tells us nothing useful or serious.

Update: House Minority Leader John Boehner (R-OH), acknowledges the severity of the economic situation and the horrific drop in employment, BUT advocates a “spending freeze,” the precise opposite of what needs to happen. NY Times columnist Paul Krugman:

“I’m shocked by the total intellectual collapse of the Republican Party in the face of this economic crisis…. I’d really like to see some genuine bipartisanship in America. But that can’t happen until we start having at least somewhat sane partisans.”