Friday, September 24, 2010

Today's Best Reads

1--Replacing Summers: Think Policy, Not Politico, Zach Carter, Huffington Post

Excerpt: So who should Obama name to take Summers' place? Joseph Stiglitz. His intellectual qualifications cannot be impugned -- he is a Nobel Prize-winner whose academic work is revered on both the left and right. But his policy acumen is equally proven -- he has been chief economist for the World Bank, and Chairman of President Bill Clinton's Council of Economic Advisers. (Bravo)

2--August home sales rebound will be short lived, John Prior, Housingwire

Excerpt: If (Fannie and Freddie) flood the market, prices could drop 10% to 15% below the trough seen in 2009, dragging not only house prices but the entire economy back into a recession. If these companies continue to manage REO to a trickle, Eddins expects flattened prices for years to come.

3--The Way Out of the Slump, Paul Krugman and Robin Wells, NYRB

Excerpt: "Most of the time, we count on central banks to engineer economic recovery following a slump, much as they did after the 2001 recession. Normally, when recession strikes, the Fed, the European Central Bank, or the Bank of England cuts the short-term interest rates it controls; market-determined longer-term rates fall in sympathy; and the private sector responds by borrowing and spending more.

The sheer severity of the slump after the 2008 housing bust means, however, that this normal response falls far short of what’s needed."

4--How to Lose Over a Million Jobs, Huffington Post

Excerpt: (The Republican plan would) would reduce funding for domestic programs--which include investments in infrastructure, education, and research--by 22.7%, while extending the Bush tax cuts for top earners....Reduce the deficit by less than 5.5% in 2011.... The net job impact of the Boehner plan would be an estimated employment reduction of over 1 million jobs. (The GOP plan is a bust)

5--Larry Summers replacement: "No More Rubinites!", Huffington Post

Excerpt: A key lieutenant to Rubin after the former Goldman Sachs head and Citigroup chairman became Treasury Secretary under Clinton, Summers eventually succeeded him in that post. Together, the two men advocated for the repeal of Glass-Steagall, a Depression-era law that separated commercial banking activities from investment banking, and fought to deregulate the derivatives market. They aggressively fought back against other regulators who wished to rein in risky derivatives activities. During this administration, Summers fought back against against more aggressive financial reform measures, people familiar with the discussions say.

6--Paul Volcker slams broken financial system, Huffington Post

Excerpt: Volcker called for "structural changes in markets and market regulation."
Investment banks, he said, have become "trading machines instead of investment banks [leading to] encroachment on the territory of commercial banks, and commercial banks encroached on the territory of others in a way that couldn't easily be managed by the old supervisory system."

7--Downhill with the GOP, Paul Krugman, New York Times

8--Why backstopping repo is a bad idea, Yves Smith, naked capitalism

Intro (wonkish): The normally sound Gillian Tett of the Financial Times endorses an idea that is both dangerous and unnecessary, namely, government backstopping of the system of short-term collateralized lending called repo, for “sale with agreement to repurchase.” The problem with her analysis is that her proposal treats symptoms rather than the underlying ailment. It would amount to yet another sop to already heavily subsidized big dealer firms.

9--Weekly unemployment claims increase, calculated risk from the DOL

Summary: In the week ending Sept. 18, the advance figure for seasonally adjusted initial claims was 465,000, an increase of 12,000 from the previous week's revised figure of 453,000. The 4-week moving average was 463,250, a decrease of 3,250 from the previous week's revised average of 466,500. (More blood on the tracks)

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