Did the bailouts work? Yep.

http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_a4WFSSCbjqpjWW8

I'll pay you when he pays me, after she pays him....Check out this cool graph showing the "interconnectedness" of it all.

Getting the Government out of housing: One more from Peter Wallison.

Peter Wallison explains here.

The Government needs to get out of the mortgage business. Here's a road map on how to do it.

Peter Wallison, Alex Pollock and Ed Pinto try to provide a roadmap here to get the government out of the mortgage business. This is a great idea. Fannie and Freddie should be put "on budget" and should be scheduled to fade away over time. Underwriting standards need to be maintained and all government guarantees should end. Maybe we are getting somewhere?

The FHA is the new Fannie and Freddie. Have we learned nothing?

Peter Wallison and Ed Pinto sound the alarm here. Will anyone listen? What have we learned if the government simply shifts the purchasing of bad mortgages from Fannie and Freddie to the Federal Housing Authority, which is what Dodd-Frank has done? Risky mortgages and shotty underwriting standards are bad bets no matter who holds them on their balance sheet. It is going to happen again and no one is trying to stop it.

Ken Rogoff...time to listen.

http://blogs.wsj.com/economics/2011/02/10/qa-ken-rogoff-says-crises-are-like-heart-attacks-predicting-timing-is-tough/

Welcome home Leona Helmsley.

When I was in graduate school, I lived about one mile away from the federal prison in Lexington, KY. Leona Helmsley was was one of the most famous inmates there after she was convicted of tax evasion. She stated "taxes are for little people" and the judge did not like her tone of voice. He threw her in the cross bar hotel and her sentence started on April 15th. At that time my favorite liquor store (in reality, they're all my favorite) put up a sign that simply read "Welcome Home Leona Helmsley" and made a big joke out of it. I talked to the owner of the store and he said "how big and important do you think she feels today?"

I relate this story in connection with the attached article sent by the capable Dr. Rothman. I title it "Welcome home intended consequences".


http://online.wsj.com/article/SB10001424052748704723604575379650414337676.html?mod=WSJ_hps_LEFTWhatsNews

Barney Frank writes the rules! Why not let Roman Polanski write child care legislation too while we are at it?

It is going to happen again. And when it does we just went all in on the same failed system, i.e., "too big to fail". Nothing said at all about Fannie and Freddie. But what I will never accept is the fact that Barney Frank was the cause of most of this mess and he is the main author of the new legislation. That is sickening.






http://online.wsj.com/article/SB10001424052748703615104575328993006115992.html

Bull's Eye!

http://online.wsj.com/article/SB10001424052748704895204575320922399530274.html?mod=WSJ_Opinion_LEADTop

Ricardo Caballero and "Sudden Financial Arrest". I know it is long but it is a must read.

http://econ-www.mit.edu/files/4905

When the unthinkable becomes "thinkable".

Tip o' the hat to Dr. Rothman for sending this:


http://krugman.blogs.nytimes.com/2010/04/28/how-reversible-is-the-euro/?src=twr

This guy just plain makes sense.

http://online.wsj.com/article/SB10001424052748703871904575216633061219378.html?mod=WSJ_newsreel_opinion

I got it! But now I need to get rid of it.

Please read this if you have a mustard seed of desire to understand what happened and why.

http://online.wsj.com/public/resources/documents/crisisqa0210.pdf

Bailouts forever! An email from Peter Wallison.

"The debate over the Dodd bill has been presented by the White House as a fight between the Democrats protecting the taxpayers and Republicans protecting Wall Street.

However, Republican opposition to the Dodd bill, while amply justified by the fact that it institutionalizes too big to fail, can also be seen as an effort to protect the taxpayers from the huge costs they might have to pay if the resolution provisions in the bill are ever used.

The attached op-ed, which appeared in this morning's Wall Street Journal, shows that--contrary to President Obama's statements last week in New York--the bill currently before Congress could well result in substantial taxpayer costs. }

I thought you'd be interested.

Best regards, Peter"


http://online.wsj.com/article/SB10001424052748704627704575204160601292590.html

An email from Peter Wallison...The Dodd bill institutionalizes bailouts.

Here is the email I was sent:
"The Dodd bill has reached the Senate floor without any serious consideration of how a program of resolving systemically significant financial institutions would actually be carried out. This would be an intricate task, requiring substantial knowledge of complex assets and even more complex liabilities.

From the beginning, the administration has designated the FDIC to perform this role, and the Dodd bill simply follows that lead. No one seems to have thought whether the FDIC actually has the skills or experience to do it. A bankruptcy court seems a better choice, especially in light of the smooth handling of the Lehman bankruptcy.

The attached op-ed, which appeared in the WSJ earlier this week, addresses this subject.

I thought you’d be interested. Peter"

Here is the content of the WSJ article http://www.funnyeconomist.com/Wallison.doc

Here is another piece Peter Wallison wrote from the American Enterprise Institute regarding the designation of the fed as a "systemic regulator" which is a real bad idea: http://www.funnyeconomist.com/Fed_Wallison.pdf

But you really neeed to read this piece from today...short and sweet and to the point: The president blocked legislation that would have controlled Fannie and Freddie and now has the nerve to talk about "special interests" http://online.wsj.com/article/SB10001424052748704671904575193910683111250.html

We are institutionalizing "Too Big to Fail". Listen to Peter Wallison...he knows.

http://online.wsj.com/article/SB10001424052702303493904575167571831270694.html

Three things for sure...1. Economists are bad forecasters 2. Financial innovation will ALWAYS outpace regulation and 3. It is going to hapen again.

Greg Mankiw is always worth listening to. I like this idea of making financial firms buy contingent debt. I also like the idea of a "fire wall" for financial firms based on their charter. If you are inside the fire wall you are protected and boy are you going to pay for that insurance and should. If you are outside it, you are on your own. Then watch the market price their debt and leverage. But as sure as the sun rises tomorrow, financial markets are always going to be 3 steps ahead of regulators and another bubble is going to come along sooner or later. Then the mess we are in now will happen again....unless we take the right actions now. And we are not taking the right actions with what I have seen from proposed Senate legislation.

"Prediction is a difficult thing, especially when it has to do with the future."

http://www.nytimes.com/2010/03/28/business/economy/28view.html

This is an absolute MUST READ!

Both Dr. Rothman and Greg Mankiw alerted me to this piece from Gary Gorton of Yale University. Do yourself a favor and print these 17 highly readable pages and leave much smarter than you came!


http://online.wsj.com/public/resources/documents/crisisqa0210.pdf

It is going to happen again!

Got this email from Peter Wallison at the Amercian Enterprise Institute along with this file: http://www.funnyeconomist.com/Wallison.doc

Not so great.

Greetings,

The news from the Hill suggests that things are approaching some kind of turning point in the Senate Banking Committee. Most of the media coverage has followed the controversy over the Consumer Financial Protection Agency, but far more important in the long run are what the Senate Committee does on resolution and the regulation of large nonbank financial firms.

Government entry into these areas could have a profoundly adverse effect on our economy in the future and deserves more attention than it is getting.

In the last week, I’ve published two op-eds on different aspects of the resolution issue, especially the fact that a government resolution system for large nonbank financial firms will enhance too-big-to-fail rather than eliminate it.

I thought you’d be interested.

Best, Peter

Awwww Geeez! Martin Feldstein's state of the union economic address.

http://online.wsj.com/article/SB10001424052748703882804574642670382608340.html