Half a Dozen States Delay Tax Refunds

http://www.nytimes.com/2010/06/02/us/02refund.html?hp

The article talks of how several states are holding out on sending refunds in order to keep the money on their books until their next fiscal year starts (most are in early summer). This goes along with the money crunch we've been hearing about local and state governments having and it makes sense for these states to do this, but its with the unfortunate side effect of hurting the taxpayers who badly need the money. Thoughts?

More on Forclosures

http://timiacono.com/index.php/2010/06/01/a-homemade-mortgage-modification/

Another article that goes along with Matt's really well. It discusses mortgage modifications (something that has been put in place to help homeowner's in foreclosure). I don't think that it is a good way of helping, but it is a step in helping - but are people using it for the right reasons??

Strategic Foreclosures

Really good summary of a NYT study on homeowners choosing to foreclose. One guy summed up the decision very well:

“I’ve done the math, and it doesn’t make sense to pay the mortgage. I can rent the same house a block over for half of what I am paying. I am so far underwater that if I stay here, struggle, and make all the payments, in 10 years, I will merely be back to break even. Why bother?

Like all the big banks have all done, I’ve made the calculation that it is financially beneficial to default on the loan — so that is what I am doing. As Sonny was told in the Godfather, “This is business, not personal…”

To me, this article shows the increasing need for the government to do something about foreclosures and strategic foreclosures. Do you think what we've already done is enough? What are your thoughts?

http://www.ritholtz.com/blog/2010/06/walk-aways-nyt-version/

Goodbye to Full-time Jobs With Benefits?

"James Stoeckmann, senior practice leader at WorldatWork, a professional association of human resource executives, believes that full-time employees could become the minority of the nation's workforce within 20 to 30 years, leaving employees without traditional benefits such as health coverage, paid vacations and retirement plans, that most workers take for granted today."

Here's the article:

http://money.cnn.com/2010/06/01/news/economy/contract_jobs/index.htm

Seeing as how we are all about to enter the workforce, some of us in a matter of weeks, I feel like this hits home because we've grown up expecting to get these benefits from our future employers but now it's looking a little grim for the future of these kinds of extras. Thoughts?

Cities on the Verge of Default

http://money.cnn.com/2010/05/28/news/economy/american_cities_broke.fortune/index.htm

The article takes note of how several cities across the nation are deep in debt, including Detroit (no surprise there). The numbers aren't huge in comparison to what we're used to looking at this quarter but it all adds up and several things are going to end up being cut at the local level. What does this mean for public education and social welfare programs?

Gapminder: 200 Years That Changed the World - Grasping Reality with Both Hands

Why capitalism is the best institutional structure for the economy.


Gapminder: 200 Years That Changed the World - Grasping Reality with Both Hands

Europe again

An interesting article that discusses the bond buying plan in Europe, and that maybe it isn't the best idea.

http://online.wsj.com/article/SB10001424052748704366504575277950210434916.html?mod=WSJ_WorldMarkets_LeadStory

I agree w/ Bundesbank here. Greece relys too much on foriegn debt, and that they are only digging themselves a deeper hole. They should focus on countries that are not so dependent because they will be able to sustain themselves after a little help - where Greece probably won't be able to.

Increased and cautious optimism that the US is heading in the right direction

In this time series poll of about 1000 people, an increasing percent think the US is headed in the right direction. Note, however, that a majority believe it is heading in the wrong direction.

Welcome to the AP-GfK Poll Homepage

Shorting Reform

Here's a satire by Michael Lewis, giving Wall Street advice on how to control the senators they have in their pockets, so as to make the banks even more powerful and bring in more money.

http://www.nytimes.com/2010/05/30/opinion/30lewis.html

More Small Banks Being Shut Down

http://www.usatoday.com/money/industries/banking/2010-05-28-more-banks-shut_N.htm

The article focuses on how the FDIC closed down 5 more "small" banks Friday. With 78 bank closures this year alone and projections of over 140 total by the end of the year, it looks like the "big" banks are only going to gain more power and influence. What does the demise of all these small banks mean for us and for small businesses?

A Reason for Decreasing National Debt

Here's a video that discusses what could be gained by decreasing the national debt.

http://money.cnn.com/video/news/2010/05/28/n_ss_fiscal_debt.cnnmoney/

Thoughts?

Big 6

http://baselinescenario.com/2010/05/30/the-consensus-on-big-banks-shifts-but-not-at-treasury/#more-7668
This is a good article related to the thoughts on breaking up the big 6. I think that it could have, and probably should have happened. I think that we could have survived the failure, and that we took a lot of steps back down into a hole when we decided to bail them out. Anyone's thoughts?

I recommend you panic...

http://www.youtube.com/watch?v=nuysYXlJ43I

A good video on bailouts vs. failure and the recoveries that follow. What are your thoughts??

Euros/USD

http://freetradepicks.com/05-2010/how-i-made-4000-in-one-day-with-the-eurusd-and-how-you-can-do-it-too-2/
This is just a short, funny article about US dollars v. the Euro. Thought you all might like it!

The Beginning of Increased Savings?

After months of consumer spending growing at a higher rate than income, this trend has reversed. Some speculate the higher spending was due to high foreclosure rates and people having more expendible income. What's your opinion?

http://money.cnn.com/2010/05/28/news/economy/personal_income/index.htm

American Recovery Hinging on European Recovery

Although the countries in the Eurozone only account for about 15% of American exports, some economists speculate the deteriorating economic situation in Europe could prevent American economic recovery. Others speculate that Europe's problems could "aid consumer recovery in the United States, not slow it." What is your opinion on how large of an effect Europe can have on America's economic recovery?

http://www.nytimes.com/2010/05/30/business/30fund.html?ref=business

Growth in Sovereign Wealth Funds to Continue Unabated

More on sovereign wealth funds. Does the US have one?

Research Recap » Blog Archive » Growth in Sovereign Wealth Funds to Continue Unabated

real verus nominal

Live from the Ocean Floor: New Oil Leak Widget Features 'Spillcam' | The Rundown News Blog | PBS NewsHour | PBS

Another example of why looking at statistical data is important

Someone tells us that an index says something. But what goes into the index and how is it put together?

Good Government vs. Less Government « The Baseline Scenario

Senate bills: what they are becoming

“Geithner’s team spent much of its time during the debate over the Senate bill helping Senate Banking Committee chair Chris Dodd kill off or modify amendments being offered by more-progressive Democrats. A good example was Bernie Sanders’s measure to audit the Fed, which the administration played a key role in getting the senator from Vermont to tone down. Another was the Brown-Kaufman Amendment, which became a cause célèbre among lefty reformers such as former IMF economist Simon Johnson. ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’”
This is just a quote that hits a topic that I'm seeing a lot throughout a few recent financial blogs. The bills were definitely high in regulation and were critizing Wall Street to get to where they got. But as we discussed in class, those that are sitting in the House & Senate often have ties to the big companies, and therefore there have been numerous amendments. The bills are not nearly as regulatory as they began, and some wonder if it's even worth it...What are your thoughts/concerns?

Sovereign Wealth Fund Watch

The last book for the class discusses sovereign wealth funds a lot. These are stocks of money held by the government (usually central bank) of a country. The following blog link follows daily actions in these funds. Looking at the headlines while reading the book, especially the first chapters, is kind of fun.

Sovereign Wealth Fund Watch

OECD says Rich Countries are Recovering Faster than Expected but Unemployment Still High

The article states that the OECD boosted their projections for economic growth in 2011 and 2012, yet there is still the ever-present issue of unemployment that needs to be dealt with. They also give unemployment projections that are looking very dim (almost double digits for Europe and the US). How important is it for the future growth of Western countries to prevent this kind of long-term unemployment?

New Macro

We have talked a few times in class about needing new theories, our old macroeconomics models no longer stand. This is an article that goes a little more in depth. Any comments?

http://www.nakedcapitalism.com/2010/05/alford-why-we-need-a-new-macroeconomics.html

China Giving Ground as Relations Improve?

U.S. and China talks have been taking place on several issues including trade, currency exchange, and the new "rational and mature manner" or conflict resolution between the two countries. Apparently, China has pledged to reform its exchange rate but hasn't given a timetable. Do you think they will actually go through with this? If so what do you think a reform would completely do away with a fixed currency?


http://online.wsj.com/article/SB10001424052748703341904575266291812173592.html?mod=wsj_india_main

and you thought you were depressed

See what Simon Johnson wrote today (one of the authors of 13 Bankers). Run for the hills????

The Last Hold Out: Senator Blanche Lincoln Against 13 Bankers « The Baseline Scenario

EconomPic: U.S. Economy on Continued Life Support

GDP = C + I + G + X - M

China is increasing I; we increased G. Both increase GDP. The circular flow is working (the increase in G is multiplied) but not as much as we need it to do.

EconomPic: U.S. Economy on Continued Life Support

How Small Business are Getting Creative During the Recession

I came across this video on a unique example of how small business are trying to stay afloat during the decrease in retail sales that hit during the recession. Two unlike stores moved in together to increase sales and get customers to buy from both of their stores. The results were positive and helped the two from going bankrupt when so many other small business have had to close. Just seemed like a very creative and inspiring idea---that maybe there are some good things that can result from a poor situation.

10 Most Corrupt US Capitalists | The Big Picture

I've wondered when the social unrest would erupt from the economic unrest. The Big Picture blog is a fairly conservative investment guy one: I was surprised to see this entry on this particular blog.

10 Most Corrupt US Capitalists | The Big Picture

Your Household's Share Of The September 2008 Economic Collapse: $104,350 - The Consumerist

Thought you would find this interesting.

Your Household's Share Of The September 2008 Economic Collapse: $104,350 - The Consumerist

U.S. abandons case against AIG

In the video contained in this article, former AIG CEO Hank Greenberg comments on the future of AIG. He claims the best move is to continue to fund the recovery of AIG so they can make money to repay the taxpayers, rather than selling off the vital parts of the company. He also says that it wasn't lack of regulation that led to the crisis but rather lack of enforcing regulation on the part of the regulators. What do you think?

http://money.cnn.com/2010/05/24/news/companies/aig_probe/index.htm

GM to Fund German Recovery?

The strong turnaround of General Motors has caused the German government to deny the responsibility of bailing out Opel, a German unit of General Motors. GM doesn't want to fund the total 3.7 billion euro bill stating that since Opel is a European car company it's a problem of the European tax payers. Who do you think should pay for the bailout? Or should Opel fail?

http://www.reuters.com/article/idUSTRE64N3HV20100524

Economist's View: Modern Macroeconomic Theory and Fiscal Policy

Fiscal policy is sometimes necessary which implies running a deficit is sometimes necessary. This is one of the lessons of Keynesian economics, a form of macroeconomics that we didn't teach much of for the past 20 years. But "

Generally, demand side policies are the solution when the economy is stuck at the zero bound. Supply side polices such as a capital gains tax cut actually make things worse. The reason is that an increase in supply when demand as already insufficient causes prices to fall, and the fall in the price level raises the real interest rate. At the zero bound, the rise in the real interest rate cannot be offset by the Fed. Away from the zero bound, the Fed can stabilize the real rate and the policy has positive effects, but it depends critically on the Fed's ability to offset increases in the real rate and the nature of the reaction.

If the Fed can't lower interest rates, then monetary policy is practically useless. So deficits become an expansionary policy tool, rather than a symptom of profligate government. See
Economist's View: Modern Macroeconomic Theory and Fiscal Policy

Jobs and tax bill to cost $134 billion

http://money.cnn.com/2010/05/22/news/economy/tax_extenders_job_bill_cost/index.htm

Interesting article, is it worth to increase our deficit even if this means temporary relief and economic help?

Naked Credit Default Swaps - Credit Slips

Reading Stiglitz has led me to think about the differences between the real economy and the nominal economy. The real economy is made up of "things you can eat;" the nominal economy is made up of transactions and ownership rights. The issue of banning naked credit default swaps (see Naked Credit Default Swaps - Credit Slips)
is one of protecting the real economy from perverse incentives created in the nominal economy. That said, I do think that futures contracts for pork bellies are very different and very valuable than naked credit default swaps on Greek debt.

Double Recession

Here is an interesting video that provides Nouriel Roubini's views and thoughts on the possibility of a double recession. What are your thoughts? Will it happen? Why or Why Not?

http://www.cnbc.com/id/15840232?video=1499492692&play=1

Change in Ethics?

Harvard Business Students are joining "150 other business school students and faculty worldwide to campaign for the acceptance of an MBA ethics pledge modeled on the Hippocratic Oath taken by doctors. The aim is to get as many as 6,000 graduates at 50 MBA programs to swear they won’t put personal ambitions before the interests of their employers or society". Some students thought that it was just a cosmetic change and it will not have any effect unless there is a structural change in business. What do you think? Will this help curb unethical practices in business or will people just get caught up with greed and revert back to them?

http://www.bloomberg.com/apps/news?pid=20601109&sid=a1lZrOzMxnMM&pos=10

http://online.wsj.com/article/SB10001424052748703559004575256112299027150.html?mod=WSJ_WSJ_US_News_5

It seems that as our economy begins to slowly recover there are signs that give us the impression we are taking a step backwards. With the euro performing poorly and skepticism about their economies' strength do you think this is just a small bump in the road or should we be more cautious?

"The Euro Turns Radioactive"

http://online.wsj.com/article/SB10001424052748704691304575254683361456058.html?mod=WSJ_business_EconomyNewsBucket

Check this out, what do you think is in store for the Euro and will the dollar be able to hold long-term against the Euro?

Short Selling and Germany

We have talked about short selling as Matt explained it to us but if it is still a little murky even after watching the video that Dr. McKinney posted, here is a article that explains more about it. It also explains more about what Germany is doing and what they have banned.

http://money.cnn.com/2010/05/19/news/economy/naked_short_selling_wtf/index.htm

Wall Street Reform Is Shut Down

Today the new wall street reform was defeated 57 to 42 under Senate rules. But they only needed 3 more people to pass it to a final vote. Does it seem like we will pass any reform soon?

A couple of the key points in the reform are to:

"The legislation would establish a consumer financial protection regulatory agency that could write new rules to protect consumers from unfair or abusive mortgages and credit cards.

"It would create a council of regulators that would sound an alarm before companies are in position to trigger a financial crisis. The bill would also establish new procedures for shutting down giant financial firms that are collapsing."

These are two areas that could help us avoid such a collapse in the future and more people would be informed about what they are getting into. Do you like these aspects of the reform and what else would you add to it?

http://money.cnn.com/2010/05/19/news/economy/Wall_Street_reform/index.htm

Germany

The markets in Europe are confused.  See here.  What do you think will ultimately happen to the Eurozone?

A subprime crime in the making?

GM wants to sell to more subprime buyers
http://www.msnbc.msn.com/id/37179852/ns/business-autos/

How do you think this will turn out for GM? Do you think it's a good idea to be giving subprime loans out again? Do you agree that the market is prepared enough for GM to take on risky loans?

Great discussion on correlation assumptions in CDOs

The post is short and so are the comments.  Basically, the discussants are reviewing the formulas used to estimate the risk involved in a CDO.  Fascinating, especially in light of Tuesday's class.

AIG Stands by Its Banker — Goldman Sachs

Even after Goldman Sachs cost AIG a lot of money by being involved in risky investments and the Magnetar hedge fund; AIG has reported that they will stand behind Goldman Sachs and continue to0 conduct business with them. Their CEO Harvey Golub stated, “Goldman is a fine firm and does a lot of things extraordinarily well…where they can serve the purposes of AIG we will continue to use them….” This was suprising me a little after what Goldman Sachs has done and pretty much caused AIG to go under. Do you think that Goldman and AIG we working together in any of their financial investments? Or Do you think AIG knows that Goldman is going to change their ways and become a much safer investor?

http://blogs.wsj.com/deals/2010/05/12/aig-stands-by-its-banker-goldman-sachs/

Evidence and data: what caused the financial crisis?

One of my favorite bloggers, Barry Ritholz, has a great essay up on his blog today about the 30 year trajectory of American financial policy and innovation that underlies the crash.  The essay is short, to the point, and readable.  He says that data and evidence have to underlie explanation; ideological and political beliefs are not equivalent to data and evidence.  He says that many people are rewriting current history to absolve themselves and their pet political or ideological stance from blame. 

Fed and Wall Street Reform

http://money.cnn.com/2010/05/12/news/economy/Fed_Wall_Street_Reform/index.htm

Today Congress voted "90-9 on Wednesday to strip from the overall reform bill a provision reshaping the Fed as supervisor of only the nation's largest banks." Which does not change the Fed's regulatory power at all, do you think that this is a good thing? Or do we need to change the Fed's regulatory power? Also it seems that Congress wants to tighten the Fed's ability to loan out money in an emergency only allowing loans when "banks need access to credit -- not when banks are insolvent." Thoughts?

6 Big Changes

http://www.theatlantic.com/business/archive/2010/05/6-big-changes-the-fdic-intends-for-securitization/56622/


The FDIC is using regulatory power to make changes in securitization. The proposals currently stand in a 45 day comment period but many speculate no changes will be made. Do you guys think that the necessary changes have been made as far as their regulation limits go? Or do you think more needs to be done?

Is U.S. Greece's doppleganger??

This is an interesting article I just found on light of the recent Greece debt issues that discusses whether the U.S. debt problem is going to be Greece all over again. There is good argument for both sides, what do yall think?

States: Let taxpayers cover your mortgage

http://money.cnn.com/2010/05/12/news/economy/taxpayer_mortgages/index.htm

Check out this article. The Obama administration is using the Hardest Hit Fund to help those underwater and unemployed. Do you think the proposal will help those in trouble? Do you think the government should be supplied more money for this fund to make a proper impact? Will there be a moral hazard problem and will this dissuade people from finding work?

Euro Eating Earnings

http://money.cnn.com/2010/05/11/markets/thebuzz/index.htm

Above is an interesting article about how the downturn of the Euro is affecting American companies such as Priceline. Even as the dollar is rising in value compared to the Euro do you think that the Euro's plunge will have a great effect on Corporations or is this just a temporary shock because of the bailouts?

Goldman Sachs' moral obligation to Wall Street

http://money.cnn.com/2010/05/11/news/companies/goldman_sachs_obligation.fortune/index.htm

This is an interesting article and video regarding the opinions of Goldman Sachs shareholders. Although there still seems to be mixed emotions about Goldman's behavior, it definitely shows that people are becoming more aware about what has happened and are showing heightened levels of interest. Do you think the growing involvement of shareholders will help the S.E.C. in their suit or will it simply be another miniscule issue for Goldman to overcome?

Nouriel Roubini fears a new crisis

http://money.cnn.com/

The video is called "Nouriel Roubini fears a new crisis."

Last Tuesday Tommy brought up the point about the possibility of America going into a second recession based on historical events. Although it is another gloomy video about the state of our economy, I thought it was ironic and humerous that Nouriel Roubini (Professor of Economics-NYU Stern School of Business) expressed this as a reality. Do you think this could actually happen?

After S.E.C. Suit Warning, Traders Flee Moody’s Shares

http://www.nytimes.com/2010/05/11/business/11moodys.html?src=busln

The S.E.C. appears to be continuing their efforts in exposing the major players responsible for the financial crisis. Recently there has been a lot of negative attention regarding Goldman Sachs however it seems agencies like Moody's and Standard & Poor's have gone untouched despite their shady involvement in rating risky M.B.S.'s and C.D.O's. How do you feel about the S.E.C. finally taking action against these companies? Will this information hurt the rating agencies more than a company such as Goldman?

Goldman Sachs In More Trouble

Goldman Sachs provided a more detailed view of its legal troubles Monday, acknowledging it faces a series of government probes over some of its business dealings.

Here is the link: http://money.cnn.com/2010/05/10/news/companies/goldman_legal/index.htm

Fannie Mae Asking For More Money

Fannie Mae is asking for another $8.4 billion dollars because it still expects its losses will continue because of the trends of the housing market. Should they be allowed to recieve more money from the government?

here is the link: http://money.cnn.com/2010/05/10/news/economy/fannie_earnings/index.htm?source=cnn_bin&hpt=Sbin

Wall Street's Rocky Week

http://www.cnn.com/video/

The "Wall Street's Rocky Week" video on CNN's website does a good job of analyzing what triggered the events of last Thursday. Hopefully this helps to provide a better understanding of what happened.

AIG Making ‘Real Money’ After $1.45 Billion Profit, CEO Says

http://www.businessweek.com/news/2010-05-08/aig-making-real-money-after-1-45-billion-profit-ceo-says.html

This article talks about some of the adjustments AIG has made in order to become profitable once again. I am however still skeptical about a positive report of company such as AIG because of their recent greedy past. Based on this article, do you think this is a legitimate turn around for AIG or is it another smokescreen intended to fool investors?

US Gains 290,000 Jobs

Is this another sign that our economy is turning around?

here is the link: http://money.cnn.com/2010/05/07/news/economy/jobs_april/index.htm?cnn=yes&hpt=T3

Sorry repost

I made this post without thoroughly reading all of the earlier posts. Couldn't figure out how to delete it so just check out this post instead: http://econ490.blogspot.com/2010/05/dows-crazy-day.html

Euro tumbles to 14-month low after Greek riots trigger stock selloff

http://www.marketwatch.com/story/euro-tumbles-to-new-14-month-low-vs-dollar-2010-05-06

We are starting to see the effects stemming from the recent bailout in Greece and as expected, the Euro has suffered. Do you think these negatives will be short term as they work through the bailout aftermath or is this just the beginning of more struggles to come?

Documents reveal AT&T, Verizon, others, thought about dropping employer-sponsored benefits

http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm?cnn=yes&hpt=C2

This is an interesting article discussing some of the unintended consequences that might arise from Obama's Health Care reform. Many large companies such as ATT and Verizon have considered dropping their health care benefits for employees and simply paying the government penalty. What do you think about these interesting predictions within this article about how detrimental this trend could be for our budget deficit?

The DOW's crazy day

In one of the most gut-wrenching hours in Wall Street history, the Dow plunged almost 1,000 points Thursday, before recovering some, as on a technical glitch in the trading of Procter & Gamble stock and fears about the European debt crisis spreading.

Heres the link: http://money.cnn.com/2010/05/06/markets/markets_newyork/index.htm?hpt=T1&iref=BN1

Housing giants also insolvent

but are also too big to fail.  See here for an explanation of what Fannie and Freddie do and how they are structured. 

Is Spain Next?

http://money.cnn.com/2010/05/04/news/international/spain_debt.fortune/index.htm

Is Spain the next country to ask for money from the IMF and EU?

Goldman clients staying put

It has been nearly three weeks since the federal government stunned Wall Street by bringing civil fraud charges against Goldman Sachs.

Since then, the firm has endured a firestorm of criticism and a rash of lawsuits But so far, that has done little to scare off long-standing Goldman customers.

Looks like people still trust Goldman.

The economic risks and rewards of offshore drilling

http://money.cnn.com/2010/05/04/news/economy/oil_drilling/index.htm
http://money.cnn.com/2010/05/04/news/economy/gasoline_prices/index.htm

For my final post this week, I wanted to address a topic that I am personally concerned about. This may be slightly off topic, but thinking about future economic issues is relevant to this class in my opinion. With the disaster of the Gulf oil spill and the halt on Obama's offshore drilling plan, I wanted to address a couple of questions about the future economic effects related to our energy sources and the spill. This article I read seems to support expanding offshore drilling even after this most recent disaster. While the first article claims that 160,000 new jobs would be created, I am skeptical if that would be worth it at all. The second article I linked to argues that even with an expanded offshore drilling program, prices may not drop. Are the severe environmental risks worth it? This first article seems to think so, arguing that, "It would reduce the trade deficit, lower interest rates and boost the dollar" & that "It would generate tax revenue: The $60 billion or so in value from an extra two million barrels a day, at today's prices, might generate $30 billion a year for the federal government, once royalties and corporate taxes are paid." It seems to me that moving towards greener technology would not only create more jobs and do all of the things this article argued, but lead us away from the economic problems of another energy crisis. We are all familiar with the consequences of an energy crisis are after the 1970s. Are we eventually headed towards another energy crisis that could have severe economic effects?

No Greek tragedy for the mighty dollar

http://money.cnn.com/2010/05/03/markets/thebuzz/index.htm

We have talked about the future of the Euro in class many times already, but I found this article interesting because I think it shows that our bleak outlook for the Euro could be pretty accurate. Even with the Greek bailout, the Euro is projected to continue to drop. With Portugal and Spain looking like they may be in trouble, it could hurt it even more. In addition, according to this article, the U. S. is on the faster path to recovery and if they begin to raise interest rates first, could strengthen the dollar even more against the Euro. How much patience will countries like German and France have if the currency struggles even more?

Change Business Schools?

After reading all the information of financial crises and the current one and realizing that we were wrong about many things and how our practices and theories are not really applicable in the real world, should there be a push to change what we are teaching in our business schools? Do you think there should be a major reform especially after this current financial meltdowns? What are your thoughts?

Here is an article by the Chief Executive of The Association of MBAs on the topic:

http://business-ethics.com/2010/01/16/mba-ethics-governance-risk-management-sustainability/

US economy grows by 3.2% in first quarter

http://news.bbc.co.uk/2/hi/business/10093870.stm

I found this article interesting but I am also skeptical.

"The economy grew at a rate of 5.6% in the final quarter of 2009.

Part of the reason for the slower growth was reduced government spending and a fall in exports."

What exactly are these rates based on? Are they accurate or is there a bit of cooking in those numbers? Could the previous quarters higher rate be attributed to the holiday season when people spend the most? Obviously, longer term growth signals, such as a drop in unemployment have not come yet. And can we truly recover with the interest rate being basically 0?

Wall Street Cartoon

Here is a funny cartoon about wall street and their bailouts. There is also a bunch more that you can scroll through.

http://politicalhumor.about.com/od/economy/ig/Economic-Cartoons/Wall-Street-Redux.0ymR.htm

If you've got an hour...

Lloyd Blankfein on the Charlie Rose show. He says some really interesting things including claiming he actually supports many of the reforms that his firm has been accused of lobbying against.

http://www.charlierose.com/view/content/10989

Debt roulette: Is Portugal next?

http://money.cnn.com/2010/04/30/news/international/portugal_debt.fortune/index.htm

Sticking with the international theme, I found this article to be quite interesting. If Greece gets bailed out, the experts seem to think that Portugal will be the next to default, followed by Spain. If Greece gets bailed out, why not Portugal? If Greece does default and then Portugal does, could there be a chain reaction? What are the consequences of the Euro? I think it could end up being a chain reaction of bailouts. When do we let a country simple go under and default?

Great little cartoon

http://www.ritholtz.com/blog/2010/04/portfolio-of-securitized-souls/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29&utm_content=My+Yahoo

Bank of Japan Considers Venture-Capital Route to Spark Economy

http://www.businessweek.com/news/2010-04-30/bank-of-japan-considers-venture-capital-route-to-spark-economy.html

"Japan’s central bank may offer venture-capital type funding after cutting interest rates near zero and committing 20 trillion yen ($212 billion) into money markets failed to halt deflation."

These previous actions seem pretty extreme to me. If these did not do as intended, what is it going to take? Is this new plan really going to be effective if these other things did not? How extreme can you go before forcing the issue too much?

Goldman Sucks

Here is an interesting video that describes the power of Goldman Sachs in America. I thought it was particularly relevant considering the recent hearings this week.

Greek aid deal approaches $160 billion, government says

http://money.cnn.com/2010/04/29/news/international/greek_aid_package/index.htm

I was surprised to hear that number, $160 billion. Originally I had heard that it was only going to be somewhere around $30-40 billion. I also found this section interesting:

"Greece will be required to cut civil servants' salaries, freeze their pay increases, reduce their pension payments, change tax rates and increase the value-added tax consumers pay on purchases, according to Ilias Iliopoulos, the general secretary of the public sector union ADEDY."

When the U.S. government bailed out Wall St. and the Big Three, we did not see these types of caveats on our own money. It appears we are more protective of our money overseas. That being said, are you thrilled we are going to be dumping approximately $96 billion (60%, I am guessing that's how much we will contribute since the U.S. has the 60% stake in the IMF) into Greece? Will the Greek people be thrilled with these foreign restrictions? We already have seen how much they do not like any kind of reform.

Greece again

One of my favorite market analysts is John Mauldin.  A few weeks ago he wrote a letter to his kids explaining how Greece might affect them.  I thought the letter was both informative and interesting to read.  Here is the link.

The meat of his letter is here:

Why is Greece important? Because so much of their debt is on the books of European banks. Hundreds of billions of dollars worth. And just a few years ago this seemed like a good thing. The rating agencies made Greek debt AAA, and banks could use massive leverage (almost 40 times in some European banks) and buy these bonds and make good money in the process. (Don’t ask Dad why people still trust rating agencies. Some things just can’t be explained.)
Except, now that Greek debt is risky. Today, it appears there will be some kind of bailout for Greece. But that is just a band-aid on a very serious wound. The crisis will not go away. It will come back, unless the Greeks willingly go into their own Great Depression by slashing their spending and raising taxes to a level that no one in the US could even contemplate. What is being demanded of them is really bad for them, but they did it to themselves.
But those European banks? When that debt goes bad, and it will, they will react to each other just like they did in 2008. Trust will evaporate. Will taxpayers shoulder the burden? Maybe, maybe not. It will be a huge crisis. There are other countries in Europe, like Spain and Portugal, that are almost as bad as Greece. Great Britain is not too far behind.
The European economy is as large as that of the US. We feel it when they go into recessions, for many of our largest companies make a lot of money in Europe. A crisis will also make the euro go down, which reduces corporate profits and makes it harder for us to sell our products into Europe, not to mention compete with European companies for global trade. And that means we all buy less from China, which means they will buy less of our bonds, and on and on go the connections. And it will all make it much harder to start new companies, which are the source of real growth in jobs.

So, watch the news.  Greece is in crisis this week.

Fed set to renew promise of continued low rates

http://news.yahoo.com/s/nm/20100428/bs_nm/us_usa_fed

In class we have pondered the perils of holding interest rates too low for too long. According to this article, "The Federal Reserve on Wednesday resumed a two-day meeting where it is expected to repeat a vow to keep interest rates at rock bottom levels for "an extended period" while acknowledging the U.S. economic recovery is getting stronger."

If the recovery is gaining momentum, do we really need to hold interests so low? The article goes on to cite continued high unemployment and stable inflation as reasons to not yet tighten monetary policy? My questions are, how long can we sustain these low rates? And if signs of strength are not enough to raise rates, what will be the trigger?

Our efficient market game is explained in the Wash :Post

I read this and thought of the many ways that you all earned fees last night.  The story is about the hearings in Washington and describes the cultural divide between Wall Street and Congress.  Here is an excerpt: 

The Fab Four [the first Goldman Sachs representatives at the hearing]  made clear that there was no such thing as a bad deal or a crappy security, only mispriced risks. Nor were there winners and losers, only willing buyers and sellers. Concepts such as fairness, loyalty, shame and greed simply had no meaning on Planet Wall Street.

The whole story is here.

Wall Street reform: How it could impact you

http://money.cnn.com/2010/04/27/news/economy/Wall_Street_Reform_investors/index.htm

I found this article on CNN Money and found it interesting.

The section on investors surprised me a bit, but if reform passes it could be very good for individual investors for these reasons:

"The reform plan would impose a fiduciary duty on brokers when they give investment advice, forcing them to provide a reasonable basis on why their investment advice is the best for their client and disclose any conflicts of interest.

Furthermore, most contracts currently signed with investment advisers or brokers generally strip an investor's right to take a dispute to court, forcing the investor into an industry-run arbitration. The reform bill would give the investor the option of a court proceeding or arbitration."

While I personally was not thrilled with the power the Consumer Financial Protection Agency would have because I thought it would be too overarching, this would be ideal. Avoid those conflict of interests and give some recourse when there are legal misdoings. I was surprised to learn that the only recourse investors had previously was industry-run arbitration, which is silly and gives them no chance.

What other areas of reform do you think are most important to everyday people? This is an interesting topic that we have not dealt with a whole lot. (I think)

Questions for Goldman

In the same vein as those questions for financial reformers, CNN gives us questions for Goldman Sachs. Personally, I don't really like the first two questions. "Is this the work of a single employee?" I'm not sure what that question is supposed to accomplish. I suppose if this was all one person's "fault" we could throw them in jail and swallow the key and all feel better, but I think we already knew the problems are systematic. Pointing fingers at individuals just seems silly to me. "How should Goldman and other banks be regulated to ensure these conflicts of interest are not hurting investors?" Isn't that exactly the problem? Goldman has always had too much in put into how they should be regulated. We should not ask them because they, like all firms, are interested mainly in maximizing their profitability above all else. The second two questions though, "You've spent a big chunk of money on lobbying efforts this year. What are you trying to accomplish?" and "The slogan on your Web site is 'Our work enables growth.' How does a company that generates much of its business from trading help the economy grow?" could be informative, or at least uncomfortable for Goldman to answer (especially under oath). The public would either get a straight answer, a lie (illegal in this instance), or no answer which would only serve to raise suspicions further and make reform easier.

What do you think the regulators should ask Goldman Sachs?

This just in...

Congress is really bad at their jobs (in my very humble opinion)...

"WASHINGTON (CNNMoney.com) -- Senate Democrats failed to muster enough votes Monday to take up Wall Street reform, with a key Democrat voting with Republicans against the push to get the debate started." The senate is so caught up in the trees that we might never gets a bill that regulates the forest (the banking industry in this mixed up metaphor.) I'm not suggesting this bill is good but it should at least make it to the floor for debate so that we, as a country, can move forward.

My prediction is that financial reform will get done but it will be so watered down by industry lobbyists that it will barely be binding. Am I just a Negative Nancy?

This article discusses some of the stumbling blocks between the two parties.

An outside perspective on the IMF meetings

The IMF has just concluded its spring meeting and some are very optimistic for a very bright, but very different future. "One of the greatest achievements of the meetings should be the rise of developing countries in the world economy," an AP article claims as developing nations gained a 3.13% voting share up to 47.19% (never mind that they have well over half the world's population). Perhaps most significant to the West though, the meetings also tackled issues such as financial reform:

"The IMFC said in a communique that problems in the financial sector were at the heart of the recent global crisis, while strengthening financial regulation, supervision, and resilience remains an incomplete task.

The crisis has demonstrated the urgent need to introduce international regulatory oversight of a globalized financial system, which would create less volatile financial flows for innovation, risk taking and investing in employment, manufacturing and development.

To tackle the issue, the IMF members agreed to redouble efforts to forge a collaborative and consistent approach for a stable global financial system that can support the economic recovery."

Personally, I am not at all optimistic that the largest and most influential economies in the world, namely the United States, will go along with what the IMF says. I think reform in the United States will be disappointing to the more liberal countries of Europe but there will be little recourse for them.

In short, while these meetings probably have been productive especially in that the developing world gained some international influence, I doubt they will be very effective without broad cooperation from the United States.

See the article here: http://news.xinhuanet.com/english2010/indepth/2010-04/26/c_13267880.htm

Stimulus No Help Say Some

A CNNMoney.com article claims that, "economists think the government's stimulus package and jobs bill had little to do with the rebound." This was very surprising to see for me as I had thought the economic community was in favor of, and encouraged by, the stimulus bill/plan. I read on, "NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act." How is that for some misleading journalism? Turns out the people surveyed were not "economists" perse, but only worked in economic jobs and were surveyed only about their own companies. Additionally, that means 27% were aided by the stimulus creating how many jobs? I think it will be a long time before we know the total tally on whether or not the bailouts and stimuluses worked, but this is, in my opinion, some really poor reporting on CNN's part. What are your thoughts?

Not sovereign debt, but safe debt?

Earlier this month Timmothy Geithner (from this Wall Street Journal Blog) suggested that while Fannie Mae and Freddie Mac's debts are not one in the same with America's sovereign debt they are supported (perhaps even guaranteed) by the U.S. Government. "Geithner...said debt from the two government-sponsored enterprises isn’t the same as U.S. Treasury's, but that support for the two firms 'is crucial in helping to stabilize the housing market and the overall economy.'" This is a very similar situation to the current advantageous position of the major financial firms. With the government's backing secured, investors or loaners are confident that Fannie and Freddie are great--almost "risk free"--bets. As a result, the mortgage firms can act in whatever manner maximizes profit without regard for risk or consequences. Even worse, unlike the banks Geithner has said, "'the Administration will take care not to pursue policies or reforms in a way that would threaten to disrupt the function or liquidity of these securities or the ability of the GSEs to honor their obligations.'" In other words, the White House understands the problems with these firms but isn't prepared to do anything about it. To me, that is very very disheartening. According to the Wall Street Journal blog post mortgage reform is a lower priority than financial reform and if that legislation is anything like health care it could be months in coming.

See the article here.

China's Booming Economy

China's economic growth, even in the midst of a broad economic downturn, is literally unbelievable to me. According to Li Daokui, China's economy could grow over 10% this year and exports could grow over 30%.

Story (very short story with little detail) here: http://www.bloomberg.com/apps/news?pid=20601080&sid=aouOLtuT0A.0

But, in reality this is actually a good thing. In This Time is Different we saw that if every one has a recession at the same time then sovereign default becomes much more likely, that China's economy continues to grow is actually good for all of us, right?

Owning A Toxic Asset

NPR Money bought a toxic asset, just to see what it was like. They named it, and are following it through its, probably short, life.

Really fun site to play around on. Check it out: http://www.npr.org/templates/story/story.php?storyId=124587240

Let's lobby the Senate!!

The Dodd financial reform legislation will be voted on by the Senate on Monday.  One proposed amendment would break up the big banks.  You can  petition your senators to allow a vote on the amendment.  I read about it on Simon Johnson's blog.  Go here. 

Trading Places

The Daily Show gives us a humorous take on the reversal of roles in international economics.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Wham-O Moves to America
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

(Warning the end gets a little "salty")

Stimulative Policy Definitely Working in the Short Run

According to an article on marketwatch.com, "boosted by a federal subsidy to buyers, resales of existing homes rose 6.8% in March to a seasonally adjusted annual rate of 5.35 million from a downwardly revised 5.01 million in February...It was the first increase since November, when the previous tax credit expired. Sales in March 2010 were up 16.1% compared with March 2009." The article expresses some disagreement on the impact on housing prices though.

While I think that any movement in the housing market is probably good movement my I'm not sure if I agree with Lawrence Yun who is quoted in the argument as saying, "'The tax credit has done its work.' Given the momentum imparted by the federal tax credit, he said 'the market would be able to stand on its own feet' in the second half of the year." I tend to feel like this stimulus can go one of two ways: it can either trickle down/up/sideways and improve housing prices and encourage future spending in the housing industry and prop up home prices, or it can simply shift demand earlier and create a major lull in market activity when the stimulus goes away. I don't know enough to say definitively one way or the other but I choose guarded optimism. What do you think?

Obama to Speak on Financial Reform

President Obama is scheduled to speak tonight about Wall street reform during the speech "Obama will charge that the financial crisis was 'born of a failure of responsibility -- from Wall Street to Washington -- that brought down many of the world's largest financial firms and nearly dragged our economy into a second Great Depression,'" The article claims that the White House feels as though it is winning the fight for reform and doesn't need to take the bankers "to the wood shed." "The president also will reiterate five key principles he wants to see in Wall Street reform legislation.They include ending the idea of a bank being too big to fail, enacting the Volcker rule -- named for former Federal Reserve Chairman Paul Volcker -- that limits the risks banks can take, making complicated financial trades known as derivatives more transparent, creating a consumer financial protection agency and allowing investors to have more say in the compensation of bank company executives." Do you think these are enough? Do you think this is political rhetoric or does it have a chance for bipartisan support? Personally I'm disappointed they aren't actively saying they want to bring back Glass Steagall. What are your thoughts?

Story Here: http://www.cnn.com/2010/POLITICS/04/22/obama.wall.street/index.html?hpt=T1

List and comparison of recessions

I know it's not "scholarly" but this is a blog and I'm in charge so I get to make the rules (we all should have learned how much I enjoy power in the monopoly game.) This wikipedia entry provides a list and a basic summary of each recession including duration and severity. I find it very interesting and informative to be able to see all of the recessions lined up. I hadn't understood how severe the current recession was until I saw this article. The other interesting thing about this article is that it claims the recession "ended" in July 2009. I doubt that that date will hold up through hindsight, however, it is interesting to think that we are past the worst of it and the current problems are problems of recovery, and not recession. Are you as surprised as me at some of these numbers?

Morgan Stanley's Huge Profit

Apparently not only Goldman is making money now. Morgan Stanley recently reported a $1.8 Billion (yes Billion, with a B) profit for the first quarter of 2010. "Morgan Stanley said it swung to a $1.8 billion profit in the first quarter Wednesday, as strong trading revenues boosted the Wall Street firm's latest results." It seems that all of these banks have returned to business as usual. "All of the nation's top banks have come roaring back in the latest quarter, not only turning a profit, but also blowing analysts' estimates out of the water."

All of this underscores to me how important financial reform remains. Profits these big are not realistic and likely are a result of huge risks. I am not saying banks shouldn't be allowed to make money, only that profits this big continue to endanger the stability of our economy. What are your thoughts?

Mathematical Modeling and Financial Crisis

Many economists, since the rise of computing in modern academia, have trended towards heavily quantitative research in economics. This form of research has led to myriad attempts at "modeling" economic behavior or outcomes. Very often these models are based on equations borrowed from math or physics. One common form of behavioral modeling is known as game theory. In our econ department many classes discuss game theory, but if you have never discussed it, or no know very little about it, check the wikipedia article that provides a lot of valuable insight. In short though, game theory attempts to formulate behavior, in this case economic or policy behavior, into games in order to predict, or model, the outcomes of those decisions.

I know we have discussed Greece at great length but this blog post takes an interesting swing at trying to model the current "to bailout or not to bailout question," into a game. For me, the problems with game theory start at the very beginning. This particular author says "Of course, the following analysis will rest on massive simplifications and lack of formalization but I think, it can still add some valuable insights into the current situation." I tend to disagree though, I feel the simplifications are so vast that the models are of little use.

The article ultimately creates two models, one simple and one even simpler, and attempts to argue that "basically nobody wants to be the first to help Greece," but that a resolution is possible.

Ultimately, we have the benefit of hindsight in having a much clearer picture of what exactly is going to become of the bailout of Greece (although not all of the questions have disappeared). So what do you guys think of the use of game theory for economic modeling?

In light of our monopoly game

I read this on a blog by Barry Ritholtz.  What follows is a direct quote from his blog:

Paul Farrell (at Marketwatch) gets his rant on, raging at the $400 million lobbyist effort Wall Street has put forth to kill financial reforms.
He writes that this “signals a resurgence of unregulated free market Reaganomics capitalism, the conservative ideology that killed Glass-Steagall in 1999 creating too-big-to-fail banks, setting the stage for the 2008 meltdown.”
But its much worse than that. What Wall Street wants is to water down reform so it can, according to Farrell, pursue these 8 goals:

(1) evade securities laws
(2) avoid taxes
(3) minimize capital requirements
(4) increase leverage
(5) hide speculative risks
(6) maximize short-term profits
(7) avoid stockholder disclosures, and
(8) manipulate regulators.

I wish I could say I disagree — but I don’t. Unless we get substantial reform, nothing will change. Why?

“Wall Street needs to continue running the same scam on taxpayers in order to get their mega-bonuses. They have lost their moral compass, sold their soul to the devil, lack a conscience, have no interest in the public.”

Well said . .  .

GM making an early payback

According to several sources, GM is planning to payback its US government bailout money ahead of its previously proposed schedule. The struggling automotive company has already repaid some of its debt and hopes to continue the prompt schedule into the near future.

Here is a link to the article:
http://www.msnbc.msn.com/id/36652465

I feel that this early repayment is a great strategy for raising consumer expectations of the company. If GM is able to live up to its new promise, hopefully other companies will also be encouraged to repay their government loans early.

The Michigan Financial Crisis

I know we tend to focus on the financial crisis on a national or global level but here is an interesting article about the financial situation in Michigan. I think it ties in nicely with the book we have been reading. The State of Michigan is receiving less tax revenue because of high unemployment rates and has less money to fund its projects. I think it interesting to see how the state is dealing with the predicament.

Here is the article:

http://www.mlive.com/news/index.ssf/2010/04/taxes_in_michigan_are_out_of_w.html

Japan: Least Unattractive Person at the Dance

Investors are starting to invest in Japan again. However, this video brings up an interesting point. The investments may not be due to less perceived risk. Instead, they may simply be due to fewer issues than some of the other major powerhouses (e.g., the US and European Union).

Here is the video (it explains the blog's title):

http://video.foxbusiness.com/#/v/4157223/investors-finding-opportunities-in-japan/?playlist_id=87185

And the good news keeps coming

More good news from the economic front this week. Today Citigroup reported $4.4 billion in profit for the first quarter of 2010. This comes after reporting losses during 8 of the last 9 quarters. Even executives at the company were surprised by these profits. Citigroup received two large government bailouts during the financial crisis and the government still has 27% ownership of the firm. The Treasury Department has stated it will begin selling its 7.7 billion shares and allow stockholders to regain control of the company. However, since there are so many outstanding shares of the company it will take a long time for stock prices to rise to their pre-crisis levels.

Citigroup has had to change many of its accounting practices and is still under the government's watchful eye but I think this is a good sign for the company and the economy. Do you think this is encouraging that there may be a light at the end of the tunnel?

The full article is here:
http://www.nytimes.com/2010/04/20/business/20citi.html?pagewanted=1&src=busln

This Bailout Is a Bargain?

Treasury officials are estimating that the price tag of financial bailout should amount to around $89 billion. This number is far below the $250 billion the Congressional Budget Office estimated last year or other analysts that put the all-in number at $1 trillion or more.

Here is the article:
http://www.nytimes.com/2010/04/18/business/economy/18gret.html?ref=business

Why are there so many different estimates and why is $89 billion considered a bargain?

From the Great Recession to "Better Than Normal"

The White House's Chief Economist Christina Romer said that the United States can come out of the "Great Recession" and be "better than normal" as long as we institute the correct policies for economic growth. She is calling for “targeted stimulus” to aid a recovery of the private sector. Romer said the economy needs additional funds to support state and local governments, an extension of unemployment insurance benefits, a $30 billion program to boost small business lending and a program to subsidize energy-efficiency renovations for homes.

Romer also said the country needs to focus on reducing it's budget deficit because a high budget deficit would lead to high interest rates and decrease investment. Rebalancing the economy for a “better normal” would mean “a higher-saving, higher-investment economy than that of recent decades,” Romer said. “Consumer caution, sounder lending practices and pro-saving policies are likely to lead to higher personal saving.”

What do you think? Is Romer correct in believing the United States can come out of this "better than normal" and with these new policies would this time really be different?


You can read the full article here:
http://www.businessweek.com/news/2010-04-18/romer-says-u-s-can-emerge-from-recession-into-better-normal-.html

Undervalued Chinese Currency

For some time there has been tension between the United States and China over Beijing's exchange rate policy. Many U.S. lawmakers want President Obama to formally label China as a currency manipulator and have also threatened to pass legislation that could lead to tariffs on some Chinese goods if Beijing does not quickly raise the value of its currency by a large amount.

However, Chinese President Hu and other Chinese officials have defended China's exchange-rate policy as an "internal affair," and have said they would not bow to external pressure to change it.

Bernanke has publicly stated that, "most economists agreed China's yuan currency is undervalued and t was one of the factors that caused the global recession" and some economists speculate that Beijing will revalue its currency by at least a small amount in the coming months.

Do you think that China will succumb to international pressure to alter its currency value? Or will China maintain its strict control over the country's currency despite its potential to threaten the global economy?

Iceland's Financial Crisis

This week the IMF approved an additional $160 million bailout to help Iceland out of their financial crisis, increasing the cost of the country's bailout to $2.1 billion. The country's financial crisis has stalled its application to join the European Union. Britain and the Netherlands have already spent over 3 billion euros to bail out stakeholders after Icelandic bank Landsbanki collapsed in 2008.

Here is an article about the banking crisis in Iceland and, in many ways, it seems very similar to the situation in the United States. The banks were taking huge risks and when those risks didn't pay off they relied on Britain, the Netherlands and the IMF for help.

http://www.guardian.co.uk/business/2010/apr/12/iceland-truth-commission-damning-report

SEC Charges Goldman Sachs with Fraud

Today, Goldman Sachs was officially charged by the Securities and Exchange Commission with defrauding investors. The SEC alleges that Goldman let a big hedge fund fill a financial product with risky subprime mortgages and then failed to disclose that to the product's buyers.

Do you think this will just be the beginning of charges filtering through the large companies who marketed and sold CDOs to investors?

Additionally, do you think the charges will hold up in court? Goldman desn't seem to think so in the following statement, "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."

Any comments on potential ramifications of this and possible future charges?

Also here is a link to an article on the charges:
http://online.wsj.com/article/SB10001424052702303491304575187920845670844.html?mod=WSJ_hpp_LEADNewsCollection

Just Don't Call It a Bailout

Republicans in Congress are arguing that the new financial regulation legislation provides for bailout. The proposed bill would "guarantee perpetual taxpayer bailouts of Wall Street banks". The main point of contention is a $50million provision, paid for by the banks, to help defray the costs of future bank failures. Republicans argue that this reduces bankers risk because there will be money in case of a crises.

http://www.npr.org/templates/story/story.php?storyId=126024295&sc=emaf

Personally, I don't believe that this is a bailout. In my opinion it is simply political semantics to stop the new regulation from being passed. However, I wonder if bankers will be willing to take greater risks since they know this safety net is in place.

What do you think? Is this new legislation promoting bailouts or is it just "political buzzwords"? And is the new regulation a good idea?

Europe's Economy

I know we discussed the future of Europe in class on Tuesday and speculated on the future of Europe and the eurozone. Here is a video that discusses the problem of Europe's economy.

http://online.wsj.com/video/leaders-seek-cure-for-ailing-europe/EE6CBB87-29EA-4CA9-8AE3-2641A79DFD42.html

Who is really bailing out Greece?

Ron Paul asked Ben Bernake this question in the following video clip.  I worry that no one in a position of responsibility is willing to take responsibility for the consequences of any decision.  I'd like to make my own fiat money. 

Greece/ Euro Financial Crisis Timeline

This is a really interesting interactive time-line that clarifies the European Debt crisis (with an emphasis on Greece). It walks the viewer through the lowering of the ratings, the attempts to slow the crisis and even some social ramifications of the crisis.

Here is the link:
http://online.wsj.com/article/SB10001424052702303950104575185400455300466.html?mod=WSJ_hpp_LEFTWhatsNewsCollection#articleTabs%3Dinteractive

The story of intergenerational theft

told by muppet-like creatures.  Enjoy.  

The Shape of Things to Come

The last two weeks we discussed the implications of the financial crisis on our personal futures. Here is an interesting article that ties into this concept. Four economists provided their opinions of where the markets are headed in the future.

http://www.newsweek.com/id/236200

Who do you think is right (if anyone)?

How Soon We Forget

Here is a video from the Colbert Report last night satirizing this weeks cover of Newsweek. It's amazing how much people are willing to celebrate when the economy takes a slight upswing. After the creation of 160,000 jobs and a slight increase in consumer spending, many believe that the worst is over. While things may be getting better, I think its important to truly learn from the current economic crisis or we are destined to repeat the same mistakes.

Here is the link to the video:
http://www.colbertnation.com/the-colbert-report-videos/270724/april-13-2010/dow-hits-11-000

and the original article from Newsweek:
http://www.newsweek.com/id/236190

What do you all think? Is it too early to start celebrating or do you think that the United States is the "Comeback Country"?

Who wants to win Britain's financial problems

In a television contest on March 29, three British leaders (Alistair Darling, George Osborne, and Vince Cable) debated over what they would do to solve the British financial crisis. The debate looks more like a TV game show, but maybe this is a good new way to campaign before their upcoming election?

http://www.economist.com/world/britain/displayStory.cfm?story_id=15833512

Fannie Mae Income Statement 2009

This is the income statement for Fannie Mae for the year of 2009. Scroll down to the bottom and take a look at the losses they acquired. It is pretty amazing to see how much money they were losing as a result of the housing market crash.

http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=fnm&period=qtr

America's crisis and what the future holds

http://www.economist.com/specialreports/displayStory.cfm?story_id=15793036

Here is a great summary of what's been going on in the crisis in America with an analysis of what the future will hold for our country. To summarize where this article is going towards: "this was no ordinary recession. The bubbly asset prices, ever easier credit and cheap oil that fuelled America’s age of consumerism are not about to return. Instead, America’s economy will undergo one of its biggest transformations in decades. This macroeconomic shift from debt and consumption to saving and exports will bring microeconomic changes too: different lifestyles, and different jobs in different places."

I think this is really true. We won't quite go back to the way things were. This recession is slightly different from others in the past in that we'll need an entire macroeconomic change. The article also talks quite a bit about an increase in exports being a major solution for the future. Do you agree with where the author thinks we're headed?

Is this real?

An article written this April depicts a graph trying to relate a country's voters to their fiscal policies. Their findings are that the less people in that country exercise, the less positive their financial outlook. How can they even begin to correlate these two things? It looks like a legitimate article, but I just thought I'd see what your opinions were on the subject...

Click here to see the actual article.