Article of the Week: 8 Feb
Bank Bailout Plan Revamped
By Deborah Solomon and Damian Paletta
By Deborah Solomon and Damian Paletta
posted by Professor Cramton at
4:57 AM
03 February 2009
About Me
- Name: Professor Cramton
- Location: Bethesda, MD
Peter Cramton is Professor of Economics at the University of Maryland. Since 1983, he has conducted research on auction theory and practice. This research appears in the leading economics journals. The main focus is the design of auctions for many related items. Applications include spectrum auctions, electricity auctions, and treasury auctions. On the practical side, he is Chairman of Market Design Inc., an economics consultancy founded in 1995, focusing on the design of auction markets.
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"UNDERSTANDING THE SECURITIZATION OF SUBPRIME MORTGAGE CREDIT"
- Adam B. Ashcraft
- Til Schuermann
http://www.ny.frb.org/research/economists/ashcraft/subprime.pdf
Interesting paper explaining the Mortgage Problem
Government Spending Is No Free Lunch
http://online.wsj.com/article/SB123258618204604599.html?mod=todays_us_opinion
This is the article about multiplier, the theory v.s. real word case.
The thing we learned from Econ 201, the multiplier is 1.5, so we can always generate more than we actually spend. However, professor Barro from Havard Univ shows how multiplier is only 0.8 in today's case. So the stimulus package will work as good as Obama team expect? Is it really that efficent as they believe?
How to Make Bad Banks Work
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=12974255&CFID=40527380&CFTOKEN=75024925
This article discusses both the positives and the negatives to the proposed Reverse Auction plan by the Obama Administration, as well as proposing a possible alternative. It relates and compares it to the US and Scandinavian governments' actions in the early 1990's in order to propose possible similarities and differences between the actions then and the proposal now.
Is everything made in China? ..or Japan? This article takes look at how the east is dependent on exports but due to more conservative policies they will be much better off than the Western counterparts.
http://www.economist.com/finance/displaystory.cfm?story_id=13022067
http://blogs.wsj.com/economics/2009/02/06/the-other-unemployment-rate-139/
"The Labor Department’s official unemployment rate hit 7.6% in January, and its jump from 4.9% a year earlier marks the largest annual increase in the unemployment rate since 1975."
"The Rise and (almost) fall of America's banks"
By STEVENSON JACOBS and ERIN McCLAM
The Associated Press
Washingtonpost.com
Sunday, February 8, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/08/AR2009020800616.html?nav=hcmoduletmv
This article addresses the progression and failures of America's banks starting from the 1970's to the present times of economic downturn. It addresses mistakes that were made by America's banks and how it could have been avoided...especially with our knowledge of what happened during the Great Depression of the 1930s. Overall, its a very interesting article.
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http://online.wsj.com/article/SB123388703203755361.html
--Interesting article about the Fed and how the stimulus plan will cause inflation - also mentions topics we covered like rising interest, etc.
http://www.marketwatch.com/news/story/obama-sees-catastrophe-without-stimulus/story.aspx?guid=%7B1F1CF193%2DCD02%2D4444%2D96C3%2D9AEDD4282368%7D
Senate Readies 780 Billion Stimulus Plan for Vote
This article discusses the stimulus plan and the bi-partisan effort to quickly makes changes so the bill can be passed quickly. Many revisions have been made and even if the bill is passed many more revisions will be made. Obama knows the plan isn't prefect, but if it is quickly passed then they can change it after the fact. As well as providing a "short-term jolt and long-term investments", the plan also has tax reliefs that will effect 95% of Americans and create jobs, with the unemployment rate at 7.6. There are some senators that don't believe this plan will help create jobs and will be a "catastrophe". But with Obama pushing this plan and the likelihood that it will get the votes it needs, we will be hearing more on this matter. I have heard good points on both sides of this topic and I believe that we need a change because whatever we are doing now is not working.
Bank Bailout Plan Revamped
By Deborah Solomon and Damian Paletta
http://online.wsj.com/article/SB123404707960860295.html
This article discusses the role of using private banks in the Obama administrations' economic recovery plan. I thought this article was relevant because it discusses the idea of an 'aggregator bank' buying up bad bank assets.
Recession vs. Depression
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=12852043
This article explains the difference between a "recession" and a "depression". This is typically determined by how much does real GDP decline and for how long. The article also briefly compares and contrasts previous global downturns and how various countries responded differently. The article goes on to explain how many argue that it is unlikely that this current recession will become a depression because policymakers have learned from the past.
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