October 11, 2009 - October 17, 2009 Archives
Oct 16 2009, 3:45PM
How To Save The Dollar
The dollar is in something of a pickle these days. On one hand, it would benefit greatly if policymakers moved to close the deficit, increase interest rates and eliminate much of the U.S.'s national debt. On the other hand, the U.S. economy is in no position to stomach any of that in the near future. In the meantime, it looks as though the dollar is going to suffer from an inevitable decline. But what if there was some way to ease the market's fears about its future?
Oct 16 2009, 3:31PM
Why Did Bank of America Post a Billion-Dollar Drop?
A week after JP Morgan and Goldman Sachs announced their stupendous third quarter results, Bank of America, tail between its legs, announced this morning that it lost more than a billion dollars due to lingering weaknesses in the consumer credit market. The downside of being the nation's largest consumer bank, as BofA is, is that your profits are somewhat tethered to the health of the general economy, which, even emerging from a recession, is still in critical condition. I think these paragraphs by Noam Scheiber make an excellent point:
Oct 16 2009, 3:08PM
Banker Bonuses in a Time of Crisis
I think this FT leader is very good. First it says that public money underwrites the bonuses banks are getting ready to hand out. That is a familiar point but one that deserves to be emphasised. Then it puts its finger on something mentioned less often. These huge bonus pools are diverting funds that could be used to build capital, which the industry as a whole urgently needs to do.
I defended the banks paying bonuses that had already been agreed before the crisis. But this really is ridiculous, and the banks should have known better, if only for PR reasons. If they get an ugly new regulation regime, they'll have only themselves to blame. Whatever they really think, deep in their hearts, they're certainly doing their best to give the impression that they believe they are entitled to collect huge paychecks no matter what happens, and have the taxpayer pick up the tab for their mistakes.
Oct 16 2009, 2:40PM
How Can We Improve Our Math Scores?
Oct 16 2009, 2:24PM
Obama Administration Worries About Commercial Real Estate
According to a new report, the Obama administration is beginning to sweat over problems in the commercial real estate market:
FOX Business has learned that President Obama has been briefed by his economic team on widespread concerns for commercial real estate loans, an issue many believe could trigger the next banking crisis.
The briefing occurred as many on Wall Street fear commercial mortgage-backed securities, commonly known as CMBS, will be the next set of loans to begin placing stress on banks' balance sheets.
Oct 16 2009, 1:27PM
Ticketmaster-Live Nation Update: DOJ Doesn't Like It Either
Oct 16 2009, 12:48PM
Floridians Attempting To Sue Their Way To Prosperity
I know Derek just wrote about how incredibly awful Florida's foreclosure problem is right now, but I thought I'd add a little more detail to better document its suffering. The real estate market there simply boggles the mind. Unemployment is also continuing to climb. So what are distressed Floridians doing? Suing whoever they can, of course.
Oct 16 2009, 11:43AM
Florida's Fearsome Foreclosure Funk
Oct 16 2009, 11:16AM
Wal-Mart Takes On Bookstores
Amazon.com might be feeling a little paranoid these days -- it seems like everyone is trying to ruin its efforts to be the chief online book seller. First, we hear that internet behemoth Google is going to try to encroach on up some of its e-books market share. Today we find out that retail giant Wal-Mart hopes to compete with paper book sales through its website. The latter effort is particularly notable, since Wal-Mart's threat would extend well beyond just Amazon, to jeopardize the business of other book retailers.
Oct 16 2009, 10:45AM
Report Card: Which Groups Use Social Media?
Being tech savvy is a prized credential among the nation's top political organizations. As new social media tools have popped up over the past several years, the myriad activist coalitions and trade associations have started to use them to stay in touch with members and generate buzz. If you're a political activist, chances are someone has tried to reach out to you online.
But which groups use the most online media tools? And which tools get used the most?
Oct 16 2009, 10:40AM
New SEC Enforcement COO From... Goldman?
Somewhere Matt Taibbi just had an "Aha!" moment, or an aneurism. Apparently the Goldman-Washington conspiracy continues. Bloomberg reports that the Securities and Exchange Commission, probably the most major Wall Street watchdog, has hired a former Goldman employee to act as the Chief Operating Officer for its enforcement division. All of Madoff's former employees must have already busy.
Oct 16 2009, 10:25AM
"We Will Control Healthcare Costs, Because We Have To"
Oct 16 2009, 10:15AM
Writedowns, Blocked Pay Make Rough Day for BofA's Ken Lewis
Oct 16 2009, 9:30AM
The Dark Side of Corporations' Cause-Marketing
A recent Daily Finance article details the hurdles consumers must overcome to ensure that two cents of their pink-packaged Swiffer purchase actually reach the cause the pink box implies:
Oct 15 2009, 5:47PM
Can MySpace Stage A Comeback?
There's an article today in the Wall Street Journal about the challenges facing social networking website MySpace. A modest goal, it seems, is to grow at all, much the less keep pace with its chief competitor Facebook. According to the article, it is trying to refocus its site by appealing to specific entertainment-driven audiences. Is that enough to stop the bleeding?
Oct 15 2009, 4:50PM
What Went Wrong In Stuyvesant Town?
I've noted that commercial real estate is feeling some serious pain these days, and so is New York City. But I'm still rather shocked that the enormous investment to revitalize Manhattan's Peter Cooper Village and Stuyvesant Town complex has been such an epic failure. How badly did the usually savvy Tishman Speyer Properties and BlackRock miscalculate that their cash reserve could be completely depleted by year's end?
Oct 15 2009, 4:18PM
Television Power
"We would not propose TV efficiency standards if we thought there was any evidence in the record that they will hurt the economy," said Commissioner Julia Levin, who has been in charge of the two-year rule-making procedure. "This will actually save consumers money and help the California economy grow and create new clean, sustainable jobs."
Really? America hasn't manufactured televisions in a few decades. How exactly is this going to create new, clean, sustainable jobs? Will people be so depressed by their terrible picture quality that they'll finally get off the couch and invent that perpetual motion machine?
Update: Commenter Joe says "Not true. Sony manufactured HDTVs in Westmoreland County, PA through March 1, 2009. Sony still conducts some operations there and is planning to do so through next spring, when it will shutter its plant completely."
Oct 15 2009, 4:04PM
Do Private Insurers Subsidize Public Programs?
Oct 15 2009, 3:40PM
"Saw": Most Successful Movie Franchise of All Time?
Oct 15 2009, 3:20PM
Why Is The Treasury Pressuring Banks To Repay Bailout Cash?
Yesterday, I noted that Wall Street is likely to pay out a record amount of bonuses to its employees. As earnings reports come out, we're seeing some fantastic third quarters from banks like JP Morgan and Goldman Sachs. As a result, it might not seem surprising that the Treasury has begun urging banks to repay their bailout money, if they haven't already. Despite the recent success of some banks, I'm not convinced this is a wise move, and I worry its motivation is more political than practical.
Oct 15 2009, 2:45PM
Is the Public Option Staging a Comeback?
Oct 15 2009, 1:47PM
Emissions And Economics
The Earth Policy Institute has a new update on its site this week that boldly proclaims: "U.S. Headed for Massive Decline in Carbon Emissions." (hat tip: Green, Inc.) I hope it's right! It bases its claim on some emissions data. This shows that over the past two years, carbon emissions in the U.S. have decreased dramatically. Yet, this got me thinking about something else that's decreased significantly over the past two years: economic activity. Is there a correlation?
Oct 15 2009, 12:30PM
Yet Another Social Security Problem
Most people who have some interest in U.S. politics or economics know that Social Security is a ticking time bomb. It seems like every year we hear time line revisions indicating its collapse will be sooner and sooner. Like a bomb, it's also highly volatile. It's one of those problems that everyone knows exists, but given the strength of the senior vote, virtually all politicians are too scared to even attempt to offer legitimate solutions.
But there's a new problem with Social Security, other than the path it's on, which has gotten some press recently. Unlike the larger issue, this one could be easily fixed -- assuming it is a real problem.
Oct 15 2009, 12:10PM
Stimulus Saved 30,000 Jobs. Is That Terribly Low?
Oct 15 2009, 11:15AM
Get Excited For Microsoft Stores!
Have you been clamoring to play with Microsoft Windows 7 on a big screen? Or maybe you've been dying to try out Microsoft Access. Well, your wait is finally over: the Wall Street Journal reports today that Microsoft will be opening retail stores, in a clear nod to the Apple Stores' success. Microsoft is a little late to the game, but could these stores be a success? I just don't see it.
Oct 15 2009, 11:10AM
What's Up with The Daily Beast's Advertising?
How about some advertising?
Oct 15 2009, 10:32AM
Climate Change Reform Will Be Tougher than Health Care
Oct 14 2009, 5:59PM
At 10,000 the Dow is Soaring, But the Economy is Slogging
Oct 14 2009, 4:49PM
Scoring the Baucus Bill: Tax Dynamics
So I've been thinking a lot about how the Joint Committee on Taxation projects its excise tax revenue, and the more I think about it, the more I realize just how much of the revenue they're projecting comes from a pretty elaborate dynamic effect on the labor market.
Oct 14 2009, 4:30PM
The Stimulus Has Barely Started. Is That Good?
On that issue, Atlantic Biz colleague Megan McArdle goes head to head one of my favorite business writers, Daniel Gross of Slate. Megan's point strikes me as a good one:
Oct 14 2009, 4:05PM
Power Players And Financial Crises
Rogoff: To see the universality of serial default, how few exceptions there were to countries defaulting on their debt again and again at some point in their history.
Oct 14 2009, 3:50PM
Wall Street's Record Bonuses Will Be Bigger Than They Appear
Yesterday, I wrote about how Goldman Sachs, in particular, is set to have an amazing year, which will include record bonuses. Today, the Wall Street Journal reports that the same can be said for the rest of Wall Street: its bonus pool will hit a new all-time record. As amazingly as this indicates banks have done, their employees will do even better.
Oct 14 2009, 3:31PM
Dow 10,000!!!
Oct 14 2009, 3:30PM
Why Can't Tech Writers Write About Facebook?
Today an MSNBC article about poking run under the sub-headline "Plenty of Facebookers would like to see this obsolete function outlawed." As you might expect, the article quotes exactly zero poke haters. How is it so hard to find a source that you've promised in the dek? Instead we get this hilarious paragraph:
Oct 14 2009, 3:25PM
Democrats Try to Hit the Insurance Industry Where it Hurts
The law, the McCarran-Ferguson Act, is often cited by Mr. Reid and other critics of the health insurance industry as a reason why coverage can be so expensive for many people. They say the law allows insurers to monopolize markets and fix prices in ways that are usually illegal.
Oct 14 2009, 2:45PM
The VAT's Public Perception
As Derek noted earlier, there's been a lot of talk lately in the wonkosphere about the possibility of a value-added tax (VAT). Liberals love the idea, because it would produce a lot more tax revenue. Conservatives like the idea, because they think it's fairer than a more progressive income tax. But not everybody likes the idea. In fact, everybody overwhelmingly hates it.
Oct 14 2009, 2:10PM
Cash for Clunkers Hurts, Doesn't Kill September Retail
Oct 14 2009, 1:59PM
University Discovers Incentives! Strangeness Ensues.
Then, likely as not, no matter how he soft-peddles and tiptoes, no sooner does he breathe "incentivize" than the high-strung territorial hens who are his faculty and staff stir themselves up into a shrieking frenzy, and the next thing you know, people who have feuded for 20 years over who gets the office with the fewest rain-soaked ceiling tiles are joining arms and singing The Internationale.
Oct 14 2009, 1:27PM
Saving The Stimulus From Its Critics?
Oct 14 2009, 1:17PM
Housing Crisis Worse On The High End
I've written a lot about the plight of the rich in the current recession. Reuters has an article today explaining another way in which they're suffering. Their expensive houses are losing even more value than lower priced homes. That's making matters more troublesome those trying to sell pricey estates.
Oct 14 2009, 12:39PM
The Saudis Have a Modest Proposal
As long as they pay us for the movies, bourbon, and bikinis they're not consuming, this seems eminently fair to me.
Update: Commenter Mike in DC adds "The sad thing is that if it were Midwestern farmers making this argument rather than Saudis, it would be taken seriously."
Oct 14 2009, 11:55AM
Geithner's Aides Have Wall Street Ties. So What?
Bloomberg has an article this morning that reads like a hard-hitting investigative journalism piece. It turns out they've uncovered that some of Treasury Secretary Timothy Geithner's aides earned millions of dollars working for Wall Street banks. Bloomberg might also be shocked to learn that former Treasury Secretary Hank Paulson actually was the CEO of Wall Street behemoth Goldman Sachs, and consequently surrounded himself with his Wall Street kin as well. The fact that Geithner has drawn some talent from Wall Street is not surprising, newsworthy or even bad.
Oct 14 2009, 11:25AM
What Will Bloomberg Do with BusinessWeek?
Oct 14 2009, 10:45AM
The Subsidy Problem
Over on the New York Times' Economix blog, University of Chicago Economics Professor Casey B. Mulligan has a good post about how government subsidies go awry. In the piece, he considers the proposed job creation credit for business. It sure sounds like a great idea, until you think about how businesses will actually react to it.
Oct 14 2009, 10:30AM
Google Wave Live Typing is a Fatal Flaw
Oct 14 2009, 9:50AM
Is VAT Something You Might Be Interested In?
To answer that question, the Atlantic's Clive Crook tracks down this Washington Post column by Henry Aaron and Isabel Sawhill called Bend the Revenue Curve. Crook is right: This is a really great column:
Oct 13 2009, 5:23PM
The Best Kind Of Innovation
There has been a great deal of talk about financial innovation and whether all innovation must tangibly benefit society. I'm doubtful on that criterion, as I think that so long as society isn't negatively affected by that innovation, but someone finds it useful, then its okay with me. Meanwhile, I concede that it's ideal when innovation does clearly benefit society. Although it's not related to finance, in perusing Andrew Sullivan's blog earlier, he notes a new product that fits this lofty archetype perfectly. In Great Britain, a new lip gloss is being sold that contains a date rape drug detection kit. Sullivan calls it "genius," and I agree.
Oct 13 2009, 4:06PM
California's Sensible Mortgage Restraints
Earlier, I wrote about banks' absurd push to bring back interest-only mortgages. Subsequent to that, I read the delightful news that California is coming to its senses regarding mortgage origination. The Los Angeles Times reports that Gov. Schwarzenegger signed a number of new mortgage laws late last night. I'd like to highlight several of these new rules, which I think the entire nation should embrace.
Oct 13 2009, 4:00PM
NYT Metro Cancels All Print Subscriptions. Let's See What Karma Has to Say About That
Oct 13 2009, 3:35PM
If "The Public Option" Stinks, Can We Do Better?
Oct 13 2009, 2:40PM
Goldman Bonuses Astounding But Stylistically Legit
Andrew Ross Sorkin has a good column today about the public anger that will inevitably result when Goldman announces its bonus pool, which he says is estimated to be in the ballpark of $23 billion. He puts the number into perspective and explains that, even though the bonus pool is incredibly large, Goldman's compensation style is pretty much in line with what policymakers are calling for. I think this also illustrates a point I've made before: banks' bonus culture as a target for reform is a waste of Washington's time.
Oct 13 2009, 2:08PM
Bad Reasons to Oppose the Consumer Protection Agency
Have you heard the rumor that the Consumer Financial Protection Agency would jack up interest rates and put a stranglehold on job growth after the recession? If you did, you might be able to trace it back to David S. Evans, of the University of Chicago Law School, and Joshua D. Wright, of George Mason University School of Law, who wrote the study The Effect of the Consumer Financial Protection Agency Act of 2009 on Consumer Credit. (h/t Volokh Conspiracy.) In it, they make some pretty bold claims about the effect of the CFPA on the greater economy. But do the claims hold up to scrutiny? Let's take a look.
Oct 13 2009, 1:50PM
More On Premium Predictions
But I'm not comfortable with the decision to ignore the CBO's family numbers, which are considerably less rosy than his. The CBO presumably has reasons for picking the multiples it did, including expected changes in the composition of the family market--in fact, their estimate specifically states this:
Compared with family policies that are expected to be purchased in the exchanges, family policies purchased in the current-law nongroup market cover fewer dependents, on average. That difference largely explains why the ratio of single to family premiums differs across those settings.
Of course, covering more family members is presumably valuable for people. But the fact remains that they're going to have higher premiums, and no choice about paying them.
Update: I can get something very close to Gruber's numbers if I assume 6% annual inflation for 6 years, rather than the seven I was counting between 2009 and 2016, and that young, healthy workers get virtually no discount in the current system over what Gruber estimates they would receive in a mandated, community rated system. So mystery solved, except for the part where we have 6% annual inflation.
The problem with ignoring the CBO's family estimates remains, however.
Oct 13 2009, 1:25PM
In White House v. Fox News War, Who Wins?
In the White House vs. Fox News war, I consider two scenarios likely. In the first scenario, both sides win: the White House gets a popularity spike among independents and Fox News solidifies its right-wing audience. In the second, more likely scenario, the White House looks petty and pathetic taking on Glenn Beck, and Fox News comes out on top. The other two quadrants of the game theory box -- (1) Fox News loses, White House wins; and (2) mutually assured destruction -- seem less likely.
In short, Fox News has nothing to lose here.
Oct 13 2009, 1:06PM
Banks Pushing Interest-Only Loans, Again?
Bloomberg reports:
Banks will push the Obama administration to expand its mortgage-modification program to allow interest-only periods on reworked loans, seeking to bring more homeowners into the initiative while recognizing concern that it may only postpone defaults, according to JPMorgan Chase & Co.
You might remember interest-only mortgages as one of the classic subprime ploys that blew up in banks' faces. Why are they going back down that road?
Oct 13 2009, 12:29PM
Is Health Care Reform Falling Apart?
- Sen. Jay Rockefeller (D-WV) is the biggest opponent of Sen. Max Baucus' (D-MT) tax on expensive health plans because that tax would hit West Virginia coal miners.
- Unions vigorously oppose that tax because it would hit their members.
- Moderate Democrats in the House oppose Rep. Charlie Rangel's (D-NY) supposed "millionaires surtax" because they know it would hit small businesses in their districts.
Oct 13 2009, 12:09PM
Saving Money The Excise Tax Way
They also cited projections by the Joint Committee on Taxation that about $142 billion of the 10-year total of $201 billion to be raised by the proposal would come from increased income and payroll taxes -- evidence, they said, that workers would receive increased wages if employers spent less on health benefits.
Oct 13 2009, 11:50AM
Multinationals Win Battle Over Tax Hike
A little over a month ago, I asked whether President Obama's proposed international tax changes would succeed. Last spring, the administration presented its idea to change tax rules, forcing multinational corporations to pay higher taxes. While the administration liked to characterize these changes as closing loopholes, I disagreed with that assessment, noting that they would seriously hurt U.S. corporations' international competitiveness and overall revenue. According to the Wall Street Journal, multinationals can breathe a sigh of relief, as the Obama administration has shelved the idea -- for now.
Oct 13 2009, 11:28AM
Can E-ZPass Save Your Baby's Life?
At least that's the conclusion of this study that found
reducing congestion and emissions through the E-ZPass system, premature births dropped 10.8% and instances of low birth weight declined 11.8% for mothers within two kilometers of the toll plaza.Seems a little dramatic, no?
Oct 13 2009, 11:10AM
What He Said
By now, you're probably familiar with the New Yorker article showing that Cameron Todd Willingham was almost certainly wrongly executed for arson and murder. In 2005, after the execution, Texas established a commission to investigate forensic errors, and the commission started reviewing the Willingham case. In the course of its review, the commission hired a nationally recognized fire expert who ultimately wrote a "scathing report" concluding that the arson investigation was a joke.
The expert was originally set to testify about his report on Friday, October 2. On Sept. 30, however, Perry suddenly replaced three members of the panel, including the chair, against their wishes. The new chair promptly canceled the hearing. More recently, Perry replaced a fourth member (he can only appoint four -- other state officials appoint the remaining five members).
What's amazing is not so much that Perry replaced the panel members, but that he felt secure enough to be so brazenly corrupt about it. It's a sad reflection on the state of politics in Texas that a governor could commit such blatant whitewashing two days before the hearing.
Of course, his motive is fairly clear. Perry contributed to the execution of an innocent person. And the formal recognition that Texas executed an innocent man would trigger a massive political earthquake -- one that would clarify to an inattentive public the utter barbarity and immorality of Texas's criminal justice system.
So yes, I can understand Perry's motives. But it doesn't change the fact that he is acting in a profoundly immoral way.
Yes, I'm opposed to the death penalty. But even if you're not, you can't possibly think that it's okay to avoid investigating whether your state's forensic methods risk putting innocent people in jail, or sending them to their death. No matter how strongly you favor the death penalty, I'm sure that you agree that its purpose is not to execute people; it's to execute justice. A value which Rick Perry seems determined to butcher.
Oct 13 2009, 10:52AM
Disney Making Its Stores Magical
The New York Times has a fascinating front page story today about a new strategy by the Walt Disney Company. At a time when most retailers are pulling back, Disney has decided to pour a great deal of money into its retail stores in order to make them an experience that children will beg their parents to be a part of -- like mini-theme parks. They plan to do it by using the Apple Stores as their guide, pumped full of steroids pixie dust.
Oct 13 2009, 10:45AM
Projecting Premiums Under The New Health Care Program
The Atlantic takes Columbus Day off, so I am late to the game on the dueling analyses of future health care premiums. A PWC report commissioned by the health insurance industry says that premiums will skyrocket. Meanwhile, Jonathan Gruber of MIT says no, they'll plummet! Ezra Klein says it's hard to say who's right. I don't find it hard to say that both analyses have serious problems.
Oct 13 2009, 10:44AM
What Will We Learn From BofA's Legal Documents?
Oct 13 2009, 10:13AM
In Tennis for Rivals Geithner, Summers, It's Love-Love
"Larry was an outstanding debater, and an outstanding debater is someone who thinks of a question from both sides." He added, "Larry does sometimes interact with people in a debating format, and expects them to reciprocate and to be able to engage in an intellectual tennis match."Actually, The New Republic's Noam Scheiber writes, he likes engaging in literal tennis, too.
Oct 12 2009, 3:30PM
For Millions, Unemployment Crisis is a Life Crisis
As Washington begins to take on unemployment it needs to realize that the larger economic problem is that the demand for labor is too low. This lack of demand is not manifest in unemployment alone, but also in fewer hours worked, stagnant or falling wages, and the lack of job mobility. These are important economic problems, but they're also psychological troubles because work is a defining aspect of life.
Oct 12 2009, 1:22PM
A Free-Market Case for the Public Option
Oct 12 2009, 12:35PM
Student Loans are the New Indentured Servitude
The Wall Street Journal ran a post over the weekend about a new credit crunch among low income borrowers, noting it is now 'payback time.' What they didn't go into is that their primary interviewee is drowning not on expensive cars loans but student loans. This former student's debt is far from extraordinary. It is, in fact, tragically ordinary, as student loans have become the 21st century version of indentured servitude.
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