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According to this CNN/Money report, it would appear that Wall Street has a new favorite candidate in 2012 after candidate Barack Obama, back in 2008, raised more money from the financial services industry than any other candidate in history.
New boss, same as the old boss … and the ones before that.
Maybe we’ll get a good third party candidate this year…
The chart below from this study by the CBO (Congressional Budget Office) has had a good deal of discussion today (see here and here, though there are probably a lot more by now) and for good reason. It used to be that you took a public sector job knowing that the pay wasn’t so hot but the benefits were good. Now you get both!
The CBO apparently tried to make this an apples-to-apples comparison by controlling for the many variables that affect wages and benefits and it seems to make sense – unless you’re a doctor or lawyer, you’re better compensated working for the gubment.
A couple of items related to yesterday’s Bernanke’s Disingenuous Message to Savers come via this Reuters report that chronicles the difficulty older, fixed-income investors are having under Fed Chief Ben Bernanke’s policy of freakishly low interest rates and this item at The Aleph Blog that captures my sentiments fairly well.
Bernanke Does Not Understand Savings
Twice in his press conference yesterday, Bernanke showed that he was out of touch with average Americans. He argued that average people could keep up with a 2% increase in the price level by investing in stocks and (presumably short-term) bonds.(Speaking to The Bernank)
I’m sorry, Ben, but ya gotsta come down from the uneducated ivory tower and wallow in the mud wit da restov us. There are three problems with what you said:
- It’s hard to earn 2% (after-tax) consistently when the Fed funds rate is zero.
- Only the top 20% of the wealthy have enough assets to keep themselves afloat using the asset markets. Most people would like to do something to protect themselves from inflation, but lack the means to do so.
- Average people do not invest, they save at financial intermediaries like banks, S&Ls, and life insurers. Fed policy kills rates for savers. They will not become investors, because they lack the knowledge to do so.
I am again sorry, Ben, because your policies discriminate against the poor, and the lower middle class. Yes, the rich and the upper middle-class clever can escape the penalties stemming from your policies, but the lower-middle class and the poor can’t.
Think of it this way: your policies are making it more palatable for average people to buy gold, because the alternatives in savings are lousy. If there is no income, why not grab safety from inflation?
Author David Merkel then suggests a comparison to Arthur Burns, one of the worst Fed Chairman ever, a subject that will be taken up in the next item that appears here.
After reading through some of the recently released transcripts from the 2006 Federal Reserve policy meetings, it occurred to me for about the thousandth time that economists are particularly ill-suited to oversee an economy where the financial system is, from time to time, run by psychopaths each trying to one-up the other.
During normal times, economists’ models of how the world works seem to function reasonably well, but when a multi-decade orgy of money and credit creation came to a head a few years back, they were completely unaware of how badly some people were acting and how contagious this was.
The central bank meets this week and is expected to revamp how they communicate their thinking about monetary policy to the world, but, maybe they should spend more time figuring out how to better observe what’s going on in the world – looking beyond the charts, tables, and models that they had their noses buried in back in 2006, oblivious to the looming crisis in housing and credit markets.
It was all there to see for anyone willing to make a modest effort to get out into the real world and look around.
Wild-eyed buyers lined up for blocks to buy new condos and mortgage brokers with barely a high school education were raking in hundreds of thousands of dollars a year in commissions by peddling all kinds of “exotic” mortgages to borrowers who, in many cases, didn’t really understand what they were signing.
As we’ve come to find out, there was a good deal of fraud involved here by both lenders and borrowers as few seemed to care about how their individual actions might affect others in the fullness of time.
You might say that a good asset bubble brings out the psychopath in many of us.
Of all the new phrases heard in recent months, particularly at year-end when this sort of thing gets talked about a lot, the term “forcibly retired” to describe the plight of many jobless over the age of 50 caught my attention and it was the subject of this Guardian story.
The year 2011 will be remembered as the time when many ever-optimistic Americans began to give up hope. President John F Kennedy once said that a rising tide lifts all boats. But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.
In that brief moment when the tide was indeed rising, millions of people believed that they might have a fair chance of realising the “American Dream”.
Now those dreams, too, are receding. By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment cheques had run out. Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labour force – meant little to the 50-year-olds with little hope of ever holding a job again.
Indeed, middle-aged people who thought that they would be unemployed for a few months have now realised that they were, in fact, forcibly retired. Young people who graduated from college with tens of thousands of dollars of education debt cannot find any jobs at all.
It gets even more depressing the further you read, a point that should have been clear from the title – Many Americans gave up hope last year – 2012 will be worse – but, I couldn’t help think what it’s like for the millions of people my age who took a very different route through life, perhaps worsening their financial situation as a result of the housing bubble.
I’ll get to the existing homes sales report in just a bit, but, before doing so, I wanted to point readers to this commentary by Jonathon Weil at Bloomberg today that points out one of the most disturbing aspects related to the nexus of politics and finance today – the ongoing partisan divide over what caused the financial crisis a few years back.
The way the discussion gets framed tends to go like this: Did Fannie and Freddie cause the crisis? Although this is the wrong question, I’ll try to answer it anyway by highlighting the difference between the meaning of the words “a” and “the.”
Here goes. Fannie Mae was a cause of the financial crisis. So was Freddie Mac. U.S. government housing policies, which often encouraged people to take out loans they couldn’t repay to buy homes they couldn’t afford, were also a cause. None of these was “the” cause of the crisis, because there was no single cause.
…
Two people often cited as proponents of the notion that Fannie and Freddie caused the crisis are Peter Wallison and Edward Pinto. Both are fellows at the American Enterprise Institute, a Washington think tank. Wallison was a Republican member of the Financial Crisis Inquiry Commission who wrote a 98-page dissent to the panel’s final report in 2011.
Last month, in an article responding to a column by Joe Nocera of the New York Times, Wallison and Pinto framed their thesis this way: “Our argument is and has been that the financial crisis would not have occurred but for government housing policy implemented principally through Fannie and Freddie and the Department of Housing and Urban Development.”
It’s a debatable, if not a particularly useful, observation. One reason Wallison and Pinto have drawn so much criticism for their work is that they consistently dismiss every other possible cause of the crisis, so that only Fannie, Freddie and U.S. housing policies survive the scholars’ own “but for” test. Never mind interest rates held too low for too long, worthless regulators or banks with excessive leverage, for instance.
Even New York Mayor Bloomberg came down in the “the cause” camp a month or so ago when referring to the role the government played in the housing bubble. It’s simply amazing to me that so many people seem to insist on viewing this as a black-and-white issue – that either Washington or Wall Street are to blame, but not a combination of the two.
By Tim Iacono, Since 2005
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