Archive for September 2009
Governments’ contingent liabilities: Fiscal iceberg
From The Economist print edition
Guarantees offered during the crisis pose lasting risks to America
[Greg Ip] THE visible costs of the financial crisis are well known: bank recapitalisations, stimulus spending and shrunken tax revenues. Another set of liabilities—the guarantees thrown up around financial systems a year ago to quell panic and keep credit flowing—has received far less attention. Guarantees are popular because they entail no immediate cost. But they leave the sovereign balance-sheet exposed to lurches in the financial system’s fortunes. Read the rest of this entry »
Financial reform in America: Bogged down
The Fed bypasses Congress
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[Greg Ip] TIM GEITHNER, the treasury secretary (left), has made overhauling finance a priority. Instead he faces delay. America has four federal bank regulators, including the Federal Reserve. Mr Geithner wants to increase the power of the Fed to oversee not just banks and their holding companies but any firm that might imperil the financial system. At the same time the Fed and the three other regulators would cede their consumer-protection duties to a new body.
Many in Congress are sceptical of making the Fed more powerful. They say it did too little to monitor banks’ behaviour in the lead-up to the crisis. Chris Dodd, chairman of the Senate Banking Committee, has now proposed merging the bank regulators into a single agency, stripping the Fed of its supervisory duties. This makes sense: the current set-up encourages banks to shop around for supervisors. But the proposal will be fought by regulators and by small banks which fear that big banks would capture the new agency.
Mr Geithner has also proposed compelling banks to offer “plain vanilla” products, such as no-frills credit cards. In the face of stiff opposition by bankers, Barney Frank, Mr Dodd’s counterpart in the House of Representatives, says he will not pursue this idea.
While Congress fiddles, the Fed is expanding its reach. It plans to supervise bankers’ pay practices more closely, as well as the “non-bank” lending subsidiaries of bank-holding companies. It may even use existing powers to limit banks’ positions in complex derivatives, says Karen Petrou, a consultant.
The original article is linked here.
The tyre wars: Playing with fire
From The Economist print edition
By succumbing to domestic pressures, America has started an alarming trade row with China
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[GREG IP and The Economist's Beijing Correspondent] IN RAW economic terms Barack Obama’s imposition of tariffs on Chinese tyres hardly registers. The number of jobs affected is barely a rounding error in measurements of the mighty American workforce. The cost to consumers is also slight. But in geopolitical terms, it is a whopper. Read the rest of this entry »
Older workers and the recession: Still good for a few more years
From The Economist print edition
Smaller nest-eggs enhance a long-term trend to later retirement
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[Greg Ip] IN TERMS of output, America’s recession may be showing signs of ending; but it retains its painful grip on the labour market. Non-farm employment fell in August by the smallest amount in a year in absolute terms (though by a still-horrid 216,000); but the unemployment rate nevertheless rose, to 9.7%. That is up almost five percentage points since the recession began in December 2007.
One group, however, is so far looking a bit less gloomy. The number of people aged 55 and over who are in work has climbed almost 4%, or by nearly 1m, since the recession started, even as employment of young and middle-aged workers has fallen sharply (see chart). Read the rest of this entry »
What if Lehman had not failed?
The original article is linked here.
Economics focus
What if?
From The Economist print edition
If Lehman had not failed, would the crisis have happened anyway?
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[Greg Ip] IN AUGUST 2008 Kenneth Rogoff, a Harvard University economist, briefly rocked world stockmarkets when he warned a conference in Singapore: “We’re not just going to see midsized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one—one of the big investment banks or big banks.” A month later, in the early hours of September 15th, Lehman Brothers filed for bankruptcy. Read the rest of this entry »
Response to Meltzer on Depression comparisons
Unlike any since the Depression
- Categories:
- Monetary policy
[Greg Ip] IN MY many years of reporting on the Federal Reserve, I have turned more times than I can count to Allan Meltzer. Volume One of his history of the Federal Reserve (he’s still working on Volume Two) is one of the most thumbed books on my shelf, and I consider him one of the leading authorities on 20th century economic history. Naturally I was intrigued by his criticism of comparisons between the current period and the Great Depression in the Wall Street Journal.
It’s a fascinating piece but I have several qualms with it. Read the rest of this entry »
Gary Gensler, derivatives cop: A new sheriff
From The Economist print edition
Long marginalised, the CFTC reasserts itself under a new chairman
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| This OTC derivatives market ain’t big enough for the both of us |
[Greg Ip] WHEN Gary Gensler was named late last year to head the Commodity Futures Trading Commission (CFTC), the financial industry may have thought him an ally. After all, he had been a partner at Goldman Sachs and later served under Bill Clinton’s famously deregulatory Treasury secretary, Larry Summers. But a book that Mr Gensler coauthored in 2004 might have been a better guide to his predispositions. The cover of The Great Mutual Fund Trap shows a faceless banker playing a shell game. Inside, Mr Gensler warns investors that Wall Street is continuously trying to rip them off.
Barack Obama’s financial appointees have all tended to be pro-regulation, but few are as enthusiastic as Mr Gensler. Read the rest of this entry »
