Category Archives: fiscal and monetary policy

How to Build a Recovery

Larry Summers has a long and pompous article in the FT today on building a financial recovery. If you can slog your way through the awkward constructions ("consideration should be given to whether the government should establish a mechanism for … Continue reading

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The Real Cost of the Agency Guarantee

Dan Gross says that if and when the federal government bails out Fannie and Freddie, "the bailout will be a bargain for American taxpayers, because any cost of it will be overwhelmingly offset by the tangible and quantifiable economic benefits … Continue reading

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Central Banker Salary Datapoint of the Day

Last year, the Bank of England paid about £520,000 to Mervyn King: a salary of £290,653 and pension contributions of about £230,000. This year, King isn’t eligible for pension contributions, since he’s 60 years old now and that’s the age … Continue reading

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Saving Fannie and Freddie

The WSJ’s front page this morning features an important-sounding 1,500-word article on contingency plans for Fannie Mae and Freddie Mac, recapitulating Katie Benner’s article in Fortune yesterday. What would the government do if the companies ran into trouble? What could … Continue reading

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The Fed’s Coming Rate Hikes

A lot of people seem to be watching the Fed Funds futures contract these days. I’m no expert in how to read it, but the consensus seems to be that if the market is right, the Fed will hold steady … Continue reading

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Is a Windfall Tax a Populist Pander?

Barack Obama’s economic policy, says Justin Fox, is "a hard-to-summarize mix of moderate Democratic standbys, populist silliness and the occasional truly visionary proposal". His example of an Obama "populist pander"? He favors a windfall profits tax on oil companies (which … Continue reading

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Modelling Financial Stability

Alan Greenspan once complained that "we lack the kind of analytical framework for financial stability that we have for monetary policy" – something which is clearly a problem when central banks are in charge of both things, and especially in … Continue reading

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When a Retirement Plan isn’t a Savings Plan

What’s the difference between saving for retirement, on the one hand, and plain old saving, on the other? Teresa Ghilarducci, an economist at the New School, has a provocative book out, entitled "When I’m Sixty-Four: The Plot against Pensions and … Continue reading

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The Economics of Rick Mishkin

This, from Brad DeLong, seems relevant, somehow, in the wake of Rick Mishkin’s resignation from the board of governors of the Federal Reserve: In other disciplines to leave your university because another offers to pay you more entails personal humiliation … Continue reading

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Is Ben Bernanke Too Inventive?

Steve Waldman has a great description of the powerful and inventive Ben Bernanke today: Our man Ben is like an Amadeus-cum-MacGyver, he’s brilliant, unpredictable, he’ll improvise a Delaware company from paper clips and vacuum up your derivative book with a … Continue reading

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Why the Fed Won’t Raise Rates to Prick Bubbles

Justin Lahart has a front-page article today on a group of economists studying bubbles at Princeton. It’s a perfectly interesting piece, marred only by relative weakness on the monetary-policy front. Given that the piece is illustrated with a dot portrait … Continue reading

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Bernanke on Bagehot

I doubt a week has gone by since last summer during which I haven’t seen some pundit or other trot out Walter Bagehot’s dictum that in the event of a credit crunch, the central bank should lend freely at a … Continue reading

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Bernanke: “Powerful and Inventive”

Is there some kind of law saying that any long magazine profile of Ben Bernanke must mention Milton Friedman in the opening sentence and the Great Depression in the opening paragraph? First Roger Lowenstein did it, and now Steve Matthews … Continue reading

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Let Them Eat Bear

Now that’s what I call a power lunch: Federal Reserve Chairman Ben S. Bernanke lunched on March 11 with a Who’s Who of Wall Street leaders, including JPMorgan Chase & Co.’s Jamie Dimon, three days before the central bank rescued … Continue reading

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The US Economy Reaches a Fork in the Road

There’s been a lot of good stuff written on the GDP report, much of it on the slightly boring question of whether it means we’re in a recession. To me, the answer’s pretty simple: you have to be clear about … Continue reading

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Agricultural Subsidies: Still a Bad Idea

If you want proof that the free-market intelligentsia really doesn’t get what it wants, all you need to do is look at agricultural subsidies. The right hates them because, well, they’re subsidies, and the left hates them because the beneficiaries … Continue reading

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The Greenspan Defense

Have you had enough Alan Greenspan yet? Just in case his interview with Greg Ip today isn’t enough for you, I should also point out his 1,638-word "response to my critics" over at Martin Wolf’s FT.com forum. There are some … Continue reading

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Geithner Explains the Bear Stearns Rescue

Tim Geithner has shed some small amount of light today on exactly what the assets are that the Fed is financing as part of JP Morgan’s acquisition of Bear Stearns. He doesn’t give a detailed breakdown: since BlackRock is in … Continue reading

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Should the Fed Buy Securities Outright?

In a Q&A back in March, Mark Thoma proposed that the Fed should simply buy up distressed assets, rather than simply accept them as collateral: If it were my choice, If I were king of the Fed, I’d do more. … Continue reading

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Could Bear Stearns Have Filed for Chapter 11 After All?

Does Ben Bernanke know something the rest of us don’t? Here’s a little bit of today’s testimony: On March 13, Bear Stearns advised the Federal Reserve and other government agencies that its liquidity position had significantly deteriorated and that it … Continue reading

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PDCF: A Veritable Firehose of Liquidity

We knew the Fed’s new Primary Dealer Credit Facility, where it lends money to investment banks, was being used: Morgan Stanley borrowed $2 billion Tuesday from the Fed using "pretty liquid" assets as collateral, said Chief Financial Officer Colm Kelleher. … Continue reading

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The Political Independence of the Fed

As anybody who’s ever read about a Supreme Court nomination knows, the business of appointing top judges has become highly political. But when it comes to the Federal Reserve, it seems that presidential appointees are still chosen the old-fashioned way: … Continue reading

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Liquidity Returns

Alea doesn’t like it, but I actually find this reassuring: The Federal Reserve is draining U.S. banking reserves temporarily via overnight reverse repurchase agreements, the Federal Reserve of New York said on Wednesday… Such a move typically puts upward pressure … Continue reading

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Whither the Discount Window Stigma?

The WSJ headline today implies great dilemmas on Wall Street. "Firms Wrestle With Loans’ Stigma", it says, explaining: Wall Street firms were reluctant to borrow from the program Monday out of concern it could be seen as a sign of … Continue reading

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The New Committee to Save the World: Success!

Today’s 75bp rate cut came as no surprise to anybody: if anything, markets were expecting something even bigger. And when markets started trading on Monday morning, the Fed’s interventions and policy changes on Sunday were well known. Which means that … Continue reading

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