Category: Business

Economists on the Bailout – Freakonomics – Opinion – New York Times Blog:

“The only thing that seems to be moving faster than the financial crisis is the policy debate. The latest development is a statement that summarizes what I think of as the emerging consensus from academic economists; it expresses concern about various aspects of both the Paulson plan in particular, and the policy process in general.”

(Via Freakonomics – Opinion – New York Times Blog.)

Slow down. Take a breath everybody.

FactCheck.org: Who Caused the Economic Crisis?:

“So who is to blame? There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of ‘layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role.’ Here’s a partial list of those alleged to be at fault:

• The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
• Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
• Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
• Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
• The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
• Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
• Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
• Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
• The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
• An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
• Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.”

(Via FactCheck.org.)

Competing Tax Plans: Two Perspectives – Freakonomics – Opinion – New York Times Blog:

(Via Freakonomics – Opinion – New York Times Blog.)

I love freakonomics. Looking at the complete set of graphs breaks down each candidates’ tax plans. It clearly lays out the candidates’ priorities.

Presidential candidate Barack Obama once spoke to CNBC anchor Maria Bartiromo about the economy. Bartiromo made the usual comments an ideologically minded supply-sider might make, and Obama true to form, struck his usual centrist tone:

The one thing you can be assured of is I’m not going to be making these [economic] decisions based on ideology. I’m not a dogmatist…I believe in the market. I believe in entrepreneurship. I believe in opportunity. I believe in capitalism. And I want to do what works, but what I want to make sure of is it works for all America and not just a small sliver of America.

Obama does have quite the plan. It is a mixed bag to be sure, as anything political would be, but it is both a sound and refreshingly moral plan to help this economy work for all Americans. Instead of government spending per se, it consists of government investment, a key distinction from leftist ideological choices. It provides for targeted tax relief to the engines of our economy: the consumer and the more importantly small business. As a progressive he includes union protection, but departs from political pandering and opts for sensible regulation. See a pattern? I’ve said to my progressive/liberal friends that if they don’t get a pro-business, pro-growth policy that expresses their ideals and values, they might was well pack it in to conservatives whose policies smack of trickle down, faith based “economics.” No government in a free economy creates jobs. Businesses do and they don’t do so out of charity or good will. They do so out of necessity or incentive. So there has to be a system of carrots and sticks, that forces them to, as Taylor put it, “share in the surplus.” So to create jobs, you have to be pro-business in some way, and refreshingly Obama does not disappoint. More on this later.

Continue reading “Sharing Prosperity: Obama’s Economic Plan for Small Business”

I began reading John C. Bogle‘s The Battle for the Soul of Capitalism tonight. So far, it’s an interesting read. Here is a memorable quote (so far) rich with irony in today’s world:

My vantage point is that of an American businessman (and a lifelong Republican) who has spent his entire half-century-plus career in the financial field…For better or worse, my youthful idealism–the belief that any truly sound business endeavor must be built on a strong moral foundation–still remains today, at least as strong as it was all those years ago.

By the latter years of the twentieth century, our business values had eroded to a remarkable extent. Yes, we are a nation of prodigious energy, marvelous entrepreneurship, brilliant technology, creativity beyond imagination, and, at least in some corners of the business world, the idealism to make our nation and our world a better place. But I also see far too much greed, egoism, materialism, and waste to please my critical eye. I see an economy overly focused on the “haves” and not focused enough on the “have-nots,” failing to allocate our nation’s resources where they are most needed–to solve the problems of poverty and to provide quality education for all. I see a shocking misuse of the world’s natural resources, as if they were ours to waste rather than ours to preserve as a sacred trust for future generations, and I see a political system corrupted by the staggering infusion of money that is, to be blunt about it, rarely given by disinterested citizens who expect no return on their investment.

Wow. Small wonder why he isn’t all that popular with today’s so-called conservatives.

Michelle Singletary – Debt Addicts Get A Dose of Reality – washingtonpost.com:

“But many of the individuals who are overloaded with debt need to take responsibility for their bad choices, too. Take credit card debt, for example. Certainly there has been a tremendous push — for decades — by financial institutions to get people to view credit cards as indispensable.
And consumers gladly went along, with no complaint, using other people’s money until life’s hardships — a job loss, illness or divorce — got in the way and they could no longer pay today for what they long since had purchased.”

(Via The Washington Post.)

A quick, but fair, look at why debtors clearly have to share responsibility in the current economic crisis.

Obama Casts Wide Blame for Financial Crisis and Proposes Homeowner Aid – New York Times:

“‘Instead of establishing a 21st-century regulatory framework, we simply dismantled the old one,’ he said, ‘aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight.’”

(Via The NY Times.)

I’m always for keeping things balanced. One thing he can’t say without losing his bid is that a 21 century framework has to be structured so that debtors shoulder some responsibility. While I’m sure many were hoodwinked and bamboozled, many others simply got greedy and gorged on cheap debt. They have to be taken to the shed as well. Let’s hope Barack leads in an effort to setup such a system.