The Wall Street Journal has a short report today on the testimony by former Fannie and Freddie executives, as well as their government regulators, in front of the Congressionally-mandated Financial Crisis Inquiry Commission – most recently, the Commission heard from Greenspan and the central bankers. A Congressional panel heard clashing views about what caused the […]
Archive | Financial Crisis
Greenspan’s ‘The Crisis’ and Modigliani and Miller
I just finished reading Alan Greenspan’s paper for the spring Brookings economics confab, The Crisis, and then a bunch of reactions around the econo-blogosphere. The paper is well worth reading – it’s time to get beyond the blame game and the mea culpas and mea non-culpas, in order to get to longer term regulatory reform. […]
Do We Need to Subsidize Homeownership to Preserve Our National Identity?
Government efforts to subsidize homeownership helped cause or at least exacerbate the financial crisis, and left taxpayers on the hook for hundreds of billions of dollars in liability for dubious mortgages. In this recent New York Times op ed, Yale economist Robert Shiller, a leading expert on housing markets, concedes that such subsidies have little […]
Tyler Cowen in the Times Literary Supplement
My congratulations to Tyler Cowen on his lovely essay in the TLS of February 26, 2010, a review of John Lanchester, “Whoops! – Why everyone owes everyone and no one can pay.” Behind the subscriber wall, alas, but it is an intriguing, elegant review and has caused me to go order the book. (IOU rather […]
FCIC Hearings at American University
I would be remiss if I did not announce that the Congressionally-chartered Financial Crisis Inquiry Commission (FCIC) will be holding expert hearings this Friday and Saturday, February 26-27, at Washington College of Law, American University, Washington DC. The experts include some of the country’s leading economists, and it should be an impressive set of presentations. […]
Euro-Sense and Sensibility in the Greek Debt Crisis
Not everyone is quite so fascinated as I with CDS spreads on Greek sovereign debt. However, the issues raised by the Greek debt difficulties and the urgent discussions in the Eurozone over a possible bailout, attendant moral hazard, and the like are far more than merely fiscal or monetary questions. Rather, this crisis is one […]
Did Political Ignorance Help Cause the Financial Crisis?
Political scientist Jeffrey Friedman has an excellent article arguing that political ignorance by both regulators and voters played a key role in causing the financial crisis: You are familiar by now with the role of the Federal Reserve in stimulating the housing boom; the role of Fannie Mae and Freddie Mac in encouraging low-equity mortgages; […]
Should the Eurozone North Bribe the Eurozone South to “Temporarily” Leave?
One theoretical way out of the Greece fiscal crisis for the Eurozone might be to apply standard Coase Theorem logic and find a way in which Germany could, under whatever face-saving language is necessary, bribe Greece to withdraw from the Euro. The intent would be to get Greece off the Euro so that it could […]
How Do California and Greece Compare?
(Update.) Thanks, Glenn, for the Instalanche! Let’s add this front page article in the Financial Times today, Tuesday, February 9, 2010, “Traders in Record Bet Against the Euro.” (You might also want to see my more general discussion in a post above on the directions of the EU regarding the unstable position of currency union […]
Volcker on Financial Reform
For those following financial regulatory reform debates, Paul Volcker’s NYT op-ed today is must-reading (NYT Op Ed, Paul Volcker, How to reform our financial system, January 31, 2010) (Thanks to Paul for pointing out misspelling.) The specific points at issue are ownership or sponsorship of hedge funds and private equity funds, and proprietary trading — […]
President Obama’s Banking Proposal
(Update: I did not want to add my own reaction until I had a chance to read through the President’s speech. In quick terms, I think it is conceptually the right approach, for the reasons laid out by Manzi, McArdle, today’s WSJ editorial, but above all by Paul Volker. It is important to understand that […]
Tailgating, or, the Taleb Distribution
I am often on the prowl for metaphors to explain things in finance law to students, and I liked this discussion today (January 20, Comment) by the Financial Times’s John Kay on the distribution of returns described in Fooled by Randomness and The Black Swan: Some people have described the process as picking up dimes […]
Recovery or “Reform”?
University of Chicago economists Gary S. Becker, Steven J. Davis, and Kevin M. Murphy argue that continuing legal and regulatory uncertainty have inhibited efforts to get the economy back on track. Among other things, uncertainty about the rules of the game discourages investment and economic risk-taking. After surveying some evidence to support their argument, they […]
Greg Mankiw on Inflation and the “Surging Monetary Base”
Over at Greg Mankiw’s blog, a discussion of whether the “surging monetary base” necessarily means inflation down the road: Both reserves and T-bills are interest-paying obligations of the Federal government (including the Federal Reserve). They are essentially perfect substitutes. The monetary base, however, includes one of them but not the other, largely for historical reasons. The […]
A Cautionary Tale for Bankers, with Apologies to Hillaire Belloc
In the Financial Times today, Martin Dickson’s amusing admonition to bankers and their regulators. If you happened to be the kind of parent who read your kid Hillaire Belloc’s Cautionary Tales for Children, this will all seem like familiar terrain. Here is a bit from the opening: There was a time when naughty boys Would […]