There is no incentive for the banks to buy each other's crap and I don't think they have the equity to be doing that anyway. However, as I updated above to respond to your question, there could be incentive for banks to bid on their own assets (probably via some sort of partnership or special purpose entity where they contribute the bulk of the equity).
It shouldn't be difficult for the FDIC to determine the capital sources for each of these transactions. If XYZ entity is the bidder, XYZ should disclose its sources of capital all the way down to the individuals or entities.
This is more a study of the capital markets and finance than it is of economics IMO.
http://www.crisisofcredit.com/
To me, the causes aren't that difficult to explain although the solutions present huge problems. I may have posted this in the past so I apologize if I repeated myself.
Give him nothing but before writing to me again, please, please, please get your version of events correct. The only reason why I am suggesting you write to me again after making such an obnoxious mistake is because people across the political spectrum from you make an even worse mistake by assuming the Community Reinvestment Act is the source of your trouble.
Like I said that company can already accept a union on the basis of a card check.
A company is not required to under current law. They can request an election to confirm the results. Under the EFCA, that option is gone. I'm not convinced such drastic action is necessary.
Marshall, the problem with your logic is that you propose an either-or scenario and assume that A is the only course of action that is beneficial to organized labor. This is typical of EFCA proponents who feel that the current system is so out of whack that the solution is to prevent employers and the NLRB (at the employer's request) to verify the results of a card check. It would remove a longstanding and accepted practice of using secret ballot elections to gauge the true intentions of workers.
In all fairness, it does open up the possibility for employers to engage in unfair labor practices, and this certainly happens to some degree. Even if there a whole host of activities deemed to be unfair labor practices and a system in which union organizers can (and often do) file complaints with the National Labor Relations Board, given what I've seen, there could be problems with underenforcement or with penalties not being stiff enough.
Why not start here? Why not review and revise, if necessary, what does or does not constitute unfair labor practices and substantially increase the penalties to where these actions can be seen as a deterrent?
Although it gets into an area in which I get a little more uncomfortable (because of First Amendment implications and my own libertarian misgivings but we'll set those aside), I'd be willing to put on the table, at least for this discussion, additional regulations governing the ability for both labor unions and employers to present their viewpoints. Do we address this by allowing union orgainzers to enter worksites? In theory, I suppose it's a possibility but I haven't thought through the logistics.
I don't think supporters of EFCA have provided a convincing enough argument that the remedy they propose is necessary given the problems that they have cited to justify passing this law. Organized labor knows better than to go that route if it wants the highest possible chance to unionize several million service workers. The fastest way to do it is to create a regulatory regime heavily tilted in their favor. Amending the current process, even if the process is considered a fair one, will not achieve that objective.
It's not a matter of economics as much as it is a police power question and an aversion to special interest legislation in general. I know it's easier to just assume we hate unions but the truth is a little more complicated. Sorry to burst your bubble.
This abstraction reached new levels of capitalist purity in the current housing crisis, where home buyers were severed almost entirely from the mortgage institutions.
S&L's began selling mortgage-backed securities when they became deregulated in the early 1980's (the story of which is chronicled in Michael Lewis' Liars Poker), yet we had no problems with mortgage-backed securities until now. The problem had very little to do with severing buyers from mortgage institutions and more to do with severing the ultimate investors of the bonds collaterized by the underlying mortgages from the true nature of the risk they were assuming.
Interesting post. It's certainly not my perspective (i.e. I don't see abstract forms of ownership in financial assets) but one worth commenting on at some point when I'm not cracking bad bailout jokes.
Too efficient? With all due respect, one of the causes of the financial meltdown was an enormous information asymmetry between what the market believed was the underlying risk on the various securities backed by, among other things, subprime mortgages, and what the actual default and credit risks were.
I strongly recommend reading Roger Lowenstein's Triple A Failure:
Please keep in mind I'm no fan of the efficient markets hypothesis, especially in volatile markets where investor behavior fails to fit the "rational investor" assumption.
Agreed Chris. There were rumblings being made as early as 2006. By late 2006, JPMorgan was reducing its exposure to subprime mortgages and in the early months of 2007, people working in the debt side of the business were starting to see more volatility in pricing than they had.
Bear is probably a good starting point because it was the first of the major hits that really started to shake some people. I haven't gotten that far into this but it's good so far.
Interesting. I'd put the "First Tremors" at the Summer of 2007. I was at one of the investment banks at the time and it was around then that the credit markets began to shut down. Origination was becoming difficult and all of the sudden lenders were tightening the reins. By the fourth quarter, very little was going on.
I’m not sure how to do it. I just don’t think the fruits of rampant capitalism taste as good when they come from these massive farms instead of our local growers.
You're tasting the fruit of farm subsidies. Agriculture is hardly a hotbed of rampant capitalism.
By the way, love that word - nihilism - really jumped out at me!
It's a commonplace traits amongst back-patting, high-fiving nihilists in denial....ist. :)
Seriously though, I kind of find the whole moral clarity thing amusing since neoconservatives are, at heart, big government social conservatives and they have the same typically woeful views on allowing democratic majorities to run roughshod simply on the basis of the majority rule. Not like libertarians have any moral clarity on what liberty means or anything like that.
I was amused by Bernanke's recent comments about banks losing franchise value (speaking of BofA and Citi). I don't think banks that have lost 95% plus of their stock value and have equity values less than the cash they received from taxpayers having franchise value, but what do I know.
I think you need to make a more affirmative case for public-private partnerships than you’re making here, where you’re just asserting it as a good thing.
There have been instances of toll roads entering into a public-private partnership where the State (or the Tollway Authority) sells a leasehold interest to an outside investor who operates the roads, is responsible for maintenance and pays some annual fee. This was done with the Indiana Toll Road. Competition may not be necessary (although it is preferred).
Good question. I know Cato's Gene Healy wrote a paper (I think while in law school) that addressed this (questioning its legitimacy) as well as criticized the "libertarian centralism" of people like Randy Barnett and Clint Bolick (I'd put Richard Epstein in there also).
At this point, leaving the answer at "ignore the circumstances" since its in the document and the document is the Supreme Law of the Land (it seems Randy Barnett did this in his book) is the only answer I can give at the moment. That said, I don't want to let it go and I think a further exploration could be fun.
Maybe it's not the best answer but it's the only one I can give on the spot.
These communities often have very restrictive bylaws. Are libertarians willing to fight these semi-consensual restrictions as over reaching government on the small scale as well?
I think this is setting up a 14th Amendment debate.
I'm a constitutional originalist and I believe that the 14th Amendment's restrictions on what states can and can't do are wholly consistent with the original meaning of the text. If anything, it's underenforced.
Something that I will probably always disagree with conservatives on is that decentralization is only legitimate to the point that decentralization protects individual rights (not a community's collective right to self-govern over others per se). Otherwise, I find the whole enterprise illegitimate.
Duly noted. I don't recall anyone wondering about leftist radicals hijacking the private sector but I tend to avoid much of the conservative pundit crowd so I wonder if Krugman is invoking a strawman, even if his main argument has some merit.
That said, I think there could be a difference between a fundamental federal guarantee and nationalization. In a nationalization, I would have to think that the value of the common equity goes to zero (not that I like nationalization per se, but if it does happen, shareholders should be wiped out). I don't know what happens to the bondholders although I suspect they could face the same fate.
E.D.,
Your nihilism is putting a strain on our friendship. We should talk at some point.
*Comment archive for non-registered commenters assembled by email address as provided.
On “It may a horrible, terrible, no good, rotten and dirty plan but it’s the best we have for now…”
There is no incentive for the banks to buy each other's crap and I don't think they have the equity to be doing that anyway. However, as I updated above to respond to your question, there could be incentive for banks to bid on their own assets (probably via some sort of partnership or special purpose entity where they contribute the bulk of the equity).
It shouldn't be difficult for the FDIC to determine the capital sources for each of these transactions. If XYZ entity is the bidder, XYZ should disclose its sources of capital all the way down to the individuals or entities.
On “Geithner’s Terrible, Horrible, No Good, Very Bad Bank Plan”
I'm trying to get something going on this. More to come...
On “Economics Round-Up, or: Why We are All Screwed”
E.D.,
This is more a study of the capital markets and finance than it is of economics IMO.
http://www.crisisofcredit.com/
To me, the causes aren't that difficult to explain although the solutions present huge problems. I may have posted this in the past so I apologize if I repeated myself.
On “Do something useful for a change…”
Yglesias really has no clue.
On “Dear Abby”
Dear Perplexed,
Give him nothing but before writing to me again, please, please, please get your version of events correct. The only reason why I am suggesting you write to me again after making such an obnoxious mistake is because people across the political spectrum from you make an even worse mistake by assuming the Community Reinvestment Act is the source of your trouble.
Rest assured, I'm here for you. Be strong.
On “Celebrating Bribery, Extortion, and the End of the Secret Ballot”
Like I said that company can already accept a union on the basis of a card check.
A company is not required to under current law. They can request an election to confirm the results. Under the EFCA, that option is gone. I'm not convinced such drastic action is necessary.
Marshall, the problem with your logic is that you propose an either-or scenario and assume that A is the only course of action that is beneficial to organized labor. This is typical of EFCA proponents who feel that the current system is so out of whack that the solution is to prevent employers and the NLRB (at the employer's request) to verify the results of a card check. It would remove a longstanding and accepted practice of using secret ballot elections to gauge the true intentions of workers.
In all fairness, it does open up the possibility for employers to engage in unfair labor practices, and this certainly happens to some degree. Even if there a whole host of activities deemed to be unfair labor practices and a system in which union organizers can (and often do) file complaints with the National Labor Relations Board, given what I've seen, there could be problems with underenforcement or with penalties not being stiff enough.
Why not start here? Why not review and revise, if necessary, what does or does not constitute unfair labor practices and substantially increase the penalties to where these actions can be seen as a deterrent?
Although it gets into an area in which I get a little more uncomfortable (because of First Amendment implications and my own libertarian misgivings but we'll set those aside), I'd be willing to put on the table, at least for this discussion, additional regulations governing the ability for both labor unions and employers to present their viewpoints. Do we address this by allowing union orgainzers to enter worksites? In theory, I suppose it's a possibility but I haven't thought through the logistics.
I don't think supporters of EFCA have provided a convincing enough argument that the remedy they propose is necessary given the problems that they have cited to justify passing this law. Organized labor knows better than to go that route if it wants the highest possible chance to unionize several million service workers. The fastest way to do it is to create a regulatory regime heavily tilted in their favor. Amending the current process, even if the process is considered a fair one, will not achieve that objective.
"
I want to be like the cool kids.
"
Mark,
Whic provisions of Taft Hartley?
"
Librarians...lol
Bob,
It's not a matter of economics as much as it is a police power question and an aversion to special interest legislation in general. I know it's easier to just assume we hate unions but the truth is a little more complicated. Sorry to burst your bubble.
On “Thieves”
This abstraction reached new levels of capitalist purity in the current housing crisis, where home buyers were severed almost entirely from the mortgage institutions.
S&L's began selling mortgage-backed securities when they became deregulated in the early 1980's (the story of which is chronicled in Michael Lewis' Liars Poker), yet we had no problems with mortgage-backed securities until now. The problem had very little to do with severing buyers from mortgage institutions and more to do with severing the ultimate investors of the bonds collaterized by the underlying mortgages from the true nature of the risk they were assuming.
Interesting post. It's certainly not my perspective (i.e. I don't see abstract forms of ownership in financial assets) but one worth commenting on at some point when I'm not cracking bad bailout jokes.
On “A little bailout humor for a Tuesday afternoon…”
I'd say we're too big to fail.
On “Capital not Trade Regulation”
Too efficient? With all due respect, one of the causes of the financial meltdown was an enormous information asymmetry between what the market believed was the underlying risk on the various securities backed by, among other things, subprime mortgages, and what the actual default and credit risks were.
I strongly recommend reading Roger Lowenstein's Triple A Failure:
http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html?_r=1
Please keep in mind I'm no fan of the efficient markets hypothesis, especially in volatile markets where investor behavior fails to fit the "rational investor" assumption.
On “pbs doc: inside the meltdown”
Agreed Chris. There were rumblings being made as early as 2006. By late 2006, JPMorgan was reducing its exposure to subprime mortgages and in the early months of 2007, people working in the debt side of the business were starting to see more volatility in pricing than they had.
Bear is probably a good starting point because it was the first of the major hits that really started to shake some people. I haven't gotten that far into this but it's good so far.
"
Interesting. I'd put the "First Tremors" at the Summer of 2007. I was at one of the investment banks at the time and it was around then that the credit markets began to shut down. Origination was becoming difficult and all of the sudden lenders were tightening the reins. By the fourth quarter, very little was going on.
On “Protectionism and National Security”
I’m not sure how to do it. I just don’t think the fruits of rampant capitalism taste as good when they come from these massive farms instead of our local growers.
You're tasting the fruit of farm subsidies. Agriculture is hardly a hotbed of rampant capitalism.
On “Stress testing stressing me out…”
I'll take a look at that later but I need to edit that comment so it's more readable (not add or remove, just clean up).
"
I'll take a look at that later but I need to edit that comment so it's more readable (not add or remove, just clean up).
On “Overlearning Lessons”
By the way, love that word - nihilism - really jumped out at me!
It's a commonplace traits amongst back-patting, high-fiving nihilists in denial....ist. :)
Seriously though, I kind of find the whole moral clarity thing amusing since neoconservatives are, at heart, big government social conservatives and they have the same typically woeful views on allowing democratic majorities to run roughshod simply on the basis of the majority rule. Not like libertarians have any moral clarity on what liberty means or anything like that.
;)
On “quote of the day”
I was amused by Bernanke's recent comments about banks losing franchise value (speaking of BofA and Citi). I don't think banks that have lost 95% plus of their stock value and have equity values less than the cash they received from taxpayers having franchise value, but what do I know.
On “Balance Sheet Recession”
I think you need to make a more affirmative case for public-private partnerships than you’re making here, where you’re just asserting it as a good thing.
There have been instances of toll roads entering into a public-private partnership where the State (or the Tollway Authority) sells a leasehold interest to an outside investor who operates the roads, is responsible for maintenance and pays some annual fee. This was done with the Indiana Toll Road. Competition may not be necessary (although it is preferred).
So far so good I think although time will tell.
http://www.reason.org/commentaries/segal_20070725b.shtml
On “The Final Word on Liber-al-tarianism”
Good question. I know Cato's Gene Healy wrote a paper (I think while in law school) that addressed this (questioning its legitimacy) as well as criticized the "libertarian centralism" of people like Randy Barnett and Clint Bolick (I'd put Richard Epstein in there also).
At this point, leaving the answer at "ignore the circumstances" since its in the document and the document is the Supreme Law of the Land (it seems Randy Barnett did this in his book) is the only answer I can give at the moment. That said, I don't want to let it go and I think a further exploration could be fun.
Maybe it's not the best answer but it's the only one I can give on the spot.
"
These communities often have very restrictive bylaws. Are libertarians willing to fight these semi-consensual restrictions as over reaching government on the small scale as well?
I think this is setting up a 14th Amendment debate.
I'm a constitutional originalist and I believe that the 14th Amendment's restrictions on what states can and can't do are wholly consistent with the original meaning of the text. If anything, it's underenforced.
Something that I will probably always disagree with conservatives on is that decentralization is only legitimate to the point that decentralization protects individual rights (not a community's collective right to self-govern over others per se). Otherwise, I find the whole enterprise illegitimate.
On “can I just say…”
The Oscars were on?
On “To Nationalize or Not To Nationalize?”
I just noticed this...
http://www.businessweek.com/ap/financialnews/D96FDUU00.htm?campaign_id=bwdaily_related
Interesting...
"
Bob,
Duly noted. I don't recall anyone wondering about leftist radicals hijacking the private sector but I tend to avoid much of the conservative pundit crowd so I wonder if Krugman is invoking a strawman, even if his main argument has some merit.
That said, I think there could be a difference between a fundamental federal guarantee and nationalization. In a nationalization, I would have to think that the value of the common equity goes to zero (not that I like nationalization per se, but if it does happen, shareholders should be wiped out). I don't know what happens to the bondholders although I suspect they could face the same fate.
E.D.,
Your nihilism is putting a strain on our friendship. We should talk at some point.
*Comment archive for non-registered commenters assembled by email address as provided.