Big, and Not a Failure (Book Review)

If you’re still trying to figure out where to point the finger on last year’s financial crisis, Andrew Ross Sorkin’s “Too Big Too Fail” will offer some guidance, but not enough.

Beginning with the tightening of the credit markets in the fall of 2007, Sorkin, a New York Times reporter who heads a daily Wall Street blog called Dealbook, leverages his breadth of sources to portray a comprehensive view of the year leading up to the fall of Lehman Brothers and near-collapse of the entire financial system last fall…

Krugman: Four More Years of Unemployment (Video)

Ever since the $787 billion stimulus package passed earlier this year, economist Paul Krugman has been the squeaky wheel moaning about its small size.

“The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks,” he said at the time. “The complacency now setting in over the state of the economy is both foolish and dangerous,” he’s said since, in column titled “Mission Not Accomplished.” And at a recent talk at White & Case for the Hudson Union Society, he kept up the drumbeat:..

This Time Isn’t Different

People from Wall Street to Main Street were caught off-guard as Lehman Brothers fell and the rest of the financial system seemed to be on the verge of collapse. But according to Carmen Reinhart, Professor of Economics at the University of Maryland and co-author of This Time is Different, global financial crises have followed a predictable pattern for centuries—and policy-makers and regulators should have seen this coming. Here is what she had to say about the state of our economy, the contributing causes of financial crises, and what we can do to help prevent them in the future.

Recessionwire: The recession has been declared officially over, but what does that mean for Main Street? How long can we expect the impacts of this recession to last on banking, credit, home ownership, loans and the job market?

Reinhart: In terms of the business cycle, we have either just bottomed or are bottoming right now…

Recession Briefing 10.27: Foreclosures Become Art

What you need to know today to survive and thrive in the recession.

A photographer and an architect plan to freeze one of Detroit’s thousands of abandoned homes this winter, encasing it in ice to draw attention to foreclosures that have battered the region. (Associated Press)

House Democrats and the Obama administration are preparing to introduce major legislation that would empower the government to seize troubled firms other than banks that are deemed “too big to fail.” (Washington Post)

Star Trek as a model for recession-busting? Judy Howard Ellis writes that if joblessness in the U.S. hits 10 percent at the end of this year and hovers at 9.5 percent at the end of 2010, some Americans may be quoting Spock to get them through the economic night. (Politics Daily)…

Recession Briefing 9.17: Grocers Feeling the Pinch

What you need to know today to survive and thrive in the recession.

Supermarket prices are plunging as the global downturn drives down the cost of staples such as wheat, corn and milk and grocers fight for the wallets of penny-pinching consumers. (Washington Post)

In the economic downturn, teenagers around the world have focused their spending cuts on clothes, games and food, according to a survey by a social networking site. (Reuters)

A Wells Fargo employee is now out of a job after spending the summer partying in a foreclosed mansion in Malibu. (Washington Post/EconomyWatch)…

Bailouts Are for Bullies

Asked why the federal government refuses to bailout CIT, a major small-business lender on the brink of bankruptcy, a Treasury Department flack told MSNBC last week that “even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies.”

That didn’t prevent perennial overachievers like Bank of America, American Express, AIG, Goldman Sachs, JPMorgan Chase, Morgan Stanley, GM, Bank of New York Mellon, U.S. Bancorp, Northern Trust — wait, there’s still more — State Street, BB&T, and Capital One Financial from collectively receiving hundreds of billions in taxpayer dollars last fall.

What gives? The Obama Administration keeps touting small business as the engine of private-sector job growth so crucial to the nation’s economic recovery. CIT — which received $2.3 billion in TARP funds in December — has a million clients with some $6 billion in credit lines, all for small and midsize businesses that are now tapping these funds for every penny. Maybe that’s peanuts compared to the $600 billion fall of the Lehman Brothers, which federal officials now openly regret not saving from bankruptcy — economists estimate the collapse cost the nation as many as two million jobs. That’s a lot of jobs, but nothing compared to the 120 million Americans who …

How to Prevent the Next Crisis

The following is a section from Mark Zandi’s book Financial Shock.

As this is being written, the financial and economic crisis rages on. While progress has been made in quelling the panic in the financial system, it remains far from normal and the global economic downturn remains intense. The global economy will likely continue to shrink in 2009; the last time that occurred was during World War II. The subprime financial shock thus continues to reverberate.

Policymakers understandably have had little room to consider how to ensure that something like this never happens again. The crisis hit its apex when the Bush presidency was winding down and the Obama presidency was getting off the ground. Both were very short- staffed at a time when an army of policymakers would have had an impossible time keeping up with events. But after the panic subsides and the crisis is quelled—and it will—policymakers must quickly refocus their attention to preventing the next crisis.

What follows is four of the most pressing of my “top ten” list of what I believe needs to be done…

Obama Financial Oversight Plan mini-FAQ

President Obama has just released plans for regulatory oversight of the creaky financial system. The bulk of it focuses on bringing more of the system under fewer agencies, and on requiring less-regulated or unregulated entities like hedge funds to adhere to new rules and regulations. All are important proposals aimed at creating a more sound financial framework that keeps everyone’s money safe and capital flowing through the economy. But in the short-term, it will mainly be high-level, focused on whupping Wall Street’s excesses into shape. Here’s a little FAQ on a few of the plan’s key points. (We recommend this package at the Wall Street Journal for more in-depth look at the proposal.)

* Abolish the Office of Thrift Supervision. What’s this about? One argument for its abolishment was the oversight for the savings and loan industry, which had troubles since the 1980s. So it transforms, more like, into the National Bank Supervisor. It follows, given all the consolidation in the financial sector in the last two decades.

* Create a Consumer Financial Protection Agency. What the heck is this? This is the stuff that matters. This agency would work with state regulators to better control swindling by mortgage lenders and credit card companies.

* Give the Federal Reserve broader oversight. What does that mean, exactly? Will they be printing personalized money? Almost, but no. The Fed will now oversee parent companies, bank holding companies, as well as economic and monetary policies. But we can safely assume that we’ll all trade in the same currency, for now, and that the faces will remain the great presidents, not BSB (Ben S. Bernanke).

But it’s all just a plan, for now, and some of it over-broad and ambitious. Next up, it will be worked up into legislative language and put before Congress. By then, who knows where the financial system will be. Ah, government.

Here’s Barack Obama talking about the plan on Bloomberg: