What makes these funds different from the giant banks, investment firms and mortgage securities markets that were fatalities of the global financial crisis is this: It has taken until now for the United States government to do much of anything to try to stop it from happening again.
The fact that it has taken so long to put in rules to try to make the sector less prone to 2008-style runs — the Securities and Exchange Commission adopted new rules Wednesday on a 3-to-2 vote — is a depressing indication of the challenges that stand in the way of creating a more stable financial system.
Whatever you think of the Dodd-Frank Act and other related efforts by regulators to tighten the screws on giant banks, there’s no disputing that they are having an effect. Regulators are monitoring the inner workings of big banks more closely, and the banks in turn are holding more capital and engaging in less risky trading activity. Bankers would argue those efforts go too far and restrict the availability of capital in the economy, while some advocates would argue that they don’t go far enough. But no one disputes that the banking industry looks different than it did five years ago (see our analysis of Citigroup last week for a specific example).
But to me the key lesson is this: Even when a sector of the shadow banking system has clearly exhibited vulnerability and has been studied every which way for decades, it will take years of bureaucratic infighting to put in place rules to reform it.
“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.
So what happened after voters approved the tax increases, which took effect at the start of 2013?
Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.
California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.
Paul Krugman on the deflating deficit balloon and why the deficit alarmists now mewl instead of roar.
About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.
Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century. Oh, and the budget office now expects interest rates to remain fairly low, not much higher than the economy’s rate of growth. This in turn weakens, indeed almost eliminates, the risk of a debt spiral, in which the cost of servicing debt drives debt even higher.
Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020.
A program that provides contraceptives to low-income women contributed to a 40-percent drop in Colorado’s teen birth rate over five years, according to state officials.
The program, known as the Colorado Family Planning Initiative, provides intrauterine devices (IUDs) or implants at little to no cost for low-income women at 68 family planning clinics in Colorado.
The teen abortion rate dropped by 35 percent from 2009 to 2012 in counties served by the program, according to the state’s estimates.
Young women served by the family planning clinics also accounted for about three-fourths of the overall decline in Colorado’s teen birth rate during the same time period. And the infant caseload for Colorado WIC, a nutrition program for low-income women and their babies, fell by 23 percent from 2008 to 2013.
“This initiative has saved Colorado millions of dollars,” Governor John Hickenlooper said in a statement. “But more importantly, it has helped thousands of young Colorado women continue their education, pursue their professional goals and postpone pregnancy until they are ready to start a family.”
The fear of being unable to feed her children hangs over Dreier’s days. She and her husband, Jim, pit one bill against the next—the phone against the rent against the heat against the gas—trying always to set aside money to make up for what they can’t get from the food pantry or with their food stamps, issued by the Supplemental Nutrition Assistance Program (SNAP). Congressional cuts to SNAP last fall of five billion dollars pared her benefits from $205 to $172 a month.
On this particular afternoon Dreier is worried about the family van, which is on the brink of repossession. She and Jim need to open a new bank account so they can make automatic payments instead of scrambling to pay in cash. But that will happen only if Jim finishes work early. It’s peak harvest time, and he often works until eight at night, applying pesticides on commercial farms for $14 an hour. Running the errand would mean forgoing overtime pay that could go for groceries.
It’s the same every month, Dreier says. Bills go unpaid because, when push comes to shove, food wins out. “We have to eat, you know,” she says, only the slightest hint of resignation in her voice. “We can’t starve.”
We’ve all been there. You’re debating someone about the need for a social safety net or other government provided service and they’ll trot out the old “Private charities are answer”. Well, thanks to a new article published by the Roosevelt Institute, you can prove them wrong.
… key difference between government and charity: Where private giving might dry up in a particularly nasty recession, federal safety net programs like unemployment insurance and food stamps act as what economists call “automatic stabilizers,” meaning the worse the economy gets, the more money they pump out. Konczal writes:
During 2009, while private charity collapsed, automatic stabilizers expanded rapidly, from 0.1 percent of GDP to 2.2 percent of GDP—or a number roughly akin to all charitable giving in the United States. This was directly targeted at areas that suffered from the most unemployment, and helped those most in need—efforts that, as we’ve seen, private charity does only partially. As Goldman Sachs economists concluded, this shift made a crucial difference, and, alongside the government’s efforts to prevent the collapse of the banking sector and the Federal Reserve’s expansion of monetary policy, was a core reason the Great Recession didn’t become a second Great Depression.
Would Americans have given more if they knew the safety net wasn’t there to catch the jobless? Perhaps. But, as Konczal writes, the Great Depression already demonstrated that private charity isn’t a reliable backstop in a true crisis. Before the New Deal and the modern welfare state, Americans relied much more heavily upon volunteer groups, fraternal societies, and other sorts of private aid (government played some role too). The help these organizations provided could be spotty, but it was better than nothing. Then came the crash. Again, per Konczal:
Informal networks of local support, from churches to ethnic affiliations, were all overrun in the Great Depression. Ethnic benefit societies, building and loan associations, fraternal insurance policies, bank accounts, and credit arrangements all had major failure rates. All of the fraternal insurance societies that had served as anchors of their communities in the 1920s either collapsed or had to pull back on their services due to high demand and dwindling resources. Beyond the fact that insurance wasn’t available, this had major implications for spending, as moneylending as well as benefits for sickness and injuries were reduced.
The amendment was sponsored by Reps. Heck (D-WA), Perlmutter (D-CO), Lee (D-CA) and Rohrabacher (R-CA). It passed with bipartisan support.
This is the second time in less than two months that the House has voted to roll back marijuana law enforcement. In May, the House passed an amendment prohibiting the Drug Enforcement Administration (DEA) from undermining state medical marijuana laws and passed two amendments prohibiting the DEA from interfering with state hemp laws.
President Obama’s latest round of economic sanctions against Russia for not doing enough to quell the crisis in Eastern Ukraine is already taking its toll on Russian stocks.
The U.S. announced its latest sanctions last night after the U.S. stock market closed. The sanctions target Russia’s biggest oil producer OAO Rosneft and other companies related to Russia’s key energy business. Obama described the sanctions as “significant but targeted,” suggesting that the move is intended to have a minimal impact on U.S. companies.
In downtown Detroit, at the headquarters of the online-mortgage company Quicken Loans, there stands another downtown Detroit in miniature. The diorama, made of laser-cut acrylic and stretching out over 19 feet in length, is a riot of color and light: Every structure belonging to Quicken’s billionaire owner, Dan Gilbert, is topped in orange and illuminated from within, and Gilbert currently owns 60 of them, a lordly nine million square feet of real estate in all. He began picking up skyscrapers just three and a half years ago, one after another, paying as little as $8 a square foot. He bought five buildings surrounding Capitol Park, the seat of government when Michigan became a state in 1837. He snapped up the site of the old Hudson’s department store, where 12,000 employees catered to 100,000 customers daily in the 1950s. Many of Gilbert’s purchases are 20th-century architectural treasures, built when Detroit served as a hub of world industry. He bought a Daniel Burnham, a few Albert Kahns, a Minoru Yamasaki masterwork with a soaring glass atrium. “They’re like old-school sports cars,” said Dan Mullen, one of the executives who took over Quicken’s newly formed real estate arm. “These were buildings with so much character, so much history. They don’t exist anywhere else. And it was like, ‘Buy this parking garage, and we’ll throw in a skyscraper with it.’ “
One of Gilbert’s new downtown properties is an iconic Kahn creation from 1959 called Chase Tower, previously the National Bank of Detroit Building, which spans a full city block. Now nicknamed the Qube, the building houses hundreds of Quicken loan officers who sit or stand at small desks, working their phones. Employees are encouraged to write on the walls, which also display the latest tallied results in competitions between internal sales teams. Stenciled on the walls as well are the Quicken credos, 19 bits of pithy wisdom the company calls its “Isms.” (“The inches we need are everywhere around us.” “Numbers and money follow; they do not lead.”) Above the workers hover decorative, spacecraft-like orbs, in peach and pink and aquamarine, matching the colors of the cabinetry and carpeting. The overall atmosphere resembles “The Wolf of Wall Street” as art-directed by Dr. Seuss. When a loan officer closes a deal, the resulting mortgage contract is printed out in the nearby basement of the old Federal Reserve, another Gilbert holding. In rooms where armored cars once deposited bags of money, rows of printers run hot, spitting out tens of thousands of contracts a month, a total of $80 billion in residential mortgages last year.
I have received a number of calls from recruiters for job openings at Quicken Loans. A co-worker actually did quit to go work for them.
The whole idea of an elite few buying up and owning the entire city is kind of, well, nauseating.
Attacks on food stamps for being full of waste and fraud are fairly commonplace. “Food Stamp Program Riddled with Waste and Fraud,” one Heartland Institute post declared. “This program is known for waste, fraud and abuse,” according to Rep. Vicky Hartzler (R-MO).
The biggest problem with this critique is that it’s completely factually incorrect. Food stamp “fraud” (which mainly means trading food stamps for cash, a totally reasonable activity that in a just world would be 100 percent legal without any fees attached to it) is very rare, with a fraud rate of only 1 percent.
As for waste, the Center for Budget and Policy Priorities’ Dottie Rosenbaum has a new report explaining that the rate of overpayment and underpayment (that is, the payment of either too much or too little in benefits to participants, including any payments to ineligible people) have both been falling considerably in recent years: