Archive for January, 2011

Gambling Is Going On in Here! (576 pp.)

26 January 2011

Granted, nobody reads 576-page commission reports, but this newly released, two-year-in-the-making report by the Financial Crisis Inquiry Commission looks pretty good, based on the article about it in today’s NYT.  The article states:

‘The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.

‘“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions, which were read by The New York Times. “If we accept this notion, it will happen again.”’

Right on. And with testimony from more than 700 witnesses to inform those conclusions, there ought to be some good detail within the report.

The above conclusions might seem obvious, but acknowledging the obvious is something that politicians are not good at. And predictably, the commission was split among party lines.  The above excerpt is from the majority report. From the article:

‘Of the 10 commission members, the six appointed by Democrats endorsed the final report. Three Republican members have prepared a dissent focusing on a narrower set of causes; a fourth Republican, Peter J. Wallison, has his own dissent, calling policies to promote homeownership the major culprit. The panel was hobbled repeatedly by internal divisions and staff turnover.’

So much for feasible solutions. Even with a Democratic Congress, the financial reform bill we got last year was extremely watered down. Get ready for the next conflagration.

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Tear down the debt ceiling!

3 January 2011

Ex-Reagan Administration official Bruce Bartlett makes some excellent points about Congress’s annual vote on whether to raise the debt ceiling:

  1. it’s superfluous (no other country, as far as he could tell, has such a ritual)
  2. it’s at best a distraction
  3. it allows policymakers to vote for budget-busting tax cuts, wars, new entitlements, etc., while pretending to be deficit hawks because they voted against raising the debt ceiling
  4. worst of all, if the debt-ceiling resolution ever did get voted down, as some Republicans* are eager to do, the USA would immediately have to start defaulting on Treasury bonds as they came due.  Two hundred and twenty years of building the world’s best credit rating would be undone in a flash.

(Hat tip: WSJ Real Time Economics)

Of course, as Paul Krugman pointed out recently, in nearly all cases, “Deficit hawkery is just a stick with which to beat down social programs.” So if the object of the game is to whale away at social programs, losing the nation’s stellar credit rating would be worth it. At least on paper. “Deficit hawk” is too tame a phrase to describe a person who would favor such a strategy — “fiscal Armageddonist” is more like it.

*Ironically placed next to Bartlett’s blog post was an ad by Rep. Michele Bachmann (R-Mageddon) to “Tell Congress – Don’t Raise the Debt Ceiling.”

P.S. “Waiting for the End of the World” always sounds better live: