Elizabeth Warren discusses why the financial-consumer protection agency needs to be independent. I agree with her, but think that it should even be independent of the government. This I believe would minimize the influence of financial industrial lobbyist and save taxpayer dollars ( Read more... )

This is a well-written short summary of recent developments in the credit market. An excerpt:

"Slowly, Wall Street is reprising its critical role in the credit markets. In the third quarter investment banks sold nearly $20 billion worth of car loans, six times as much as in the same period of 2008. The yields on bonds backed by credit-card ( Read more... )

This panel discussion on PBS’s Newhour was interesting. The basic conclusion--behavior and regulation has not changed that much except organizations/people are carrying less debt. Here is a short excerpt:

"GRETCHEN MORGENSON, The New York Times: … And I think what's interesting is that you do not see regulatory change in three really important ( Read more... )

Some excerpts from Christina Romer’s testimony to the Joint Economic Committee on 4/30/2009.

On the Causes of the Crisis

"The decline in asset prices and the rise in uncertainty have also been critical to the defining feature of this recession: the drying up of credit… ( More on the mechanisms here )

Bulow and Klemperer suggest disaggregating the banks into a bridge bank (that is basically solvent) and one that is not, and begin settling debts with the creditors from there. Thanks to Gerg Mankiw for the pointer.

Against

Paul Krugman is against the Public Private Investment Program (PPIP). I tend to agree with him mostly because the current plan subsidizes the private investor a lot. This description by Nemo explains the mechanics well.

ForThe rationale for the plan is that we need to subsidize the private investor to get the markets working, which are ( Read more... )

This article by Peter Coy basically hints at the point-if it looks like bankruptcy, treat it that way. And asks the question, why shouldn’t creditors (who chose to invest) bear some financial losses before taxpayers are forced to prop-up the banks.

Amar Bhide makes a good case for reinstituting Glass-Steagall-Act-like regulation. The bottom line (in his words):

"What we need now is....rules requiring banks to focus simply on taking deposits and granting loans. This would protect depositors, limit financial-risk contagion, and allow the FDIC and the Federal Reserve to do what they do best. ( Read more... )

Joseph Stiglitz provides a very good summary of many of the factors that contributed to the current financial mess: Fed policy, repeal of Glass-Steagall, unregulated derivatives, incentive structure underlying stock-options, conflict-of-interest at rating agencies, and others.

cross-posted to my journal.

*Jeffery Sahcs for the bailout.

*Jack and Suzy Welch and Gary Becker argue against a bailout.

*Edward Glaeser argues for filing for bankruptcy first ( Read more... )