Tuesday, July 29, 2008

Your moment of Zen

For those of you who a) know who Ted Stevens is, and b) hate his guts, your moment of bliss has arrived. They're finally indicting this incredible douchebag.

This is pretty good news for the Democrats. Stevens--who is currently the longest-serving Republican in the Senate--is up for reelection this year, and I have a feeling his support is going dry up pretty quickly.

For McCain, this may be a good opportunity to show his independent streak. He's been a strong critic of Stevens in the past, frequently invoking the "Bridge to Nowhere" as an example of the wasteful pork that now dominates discretionary spending.

Anyway, the next few days should be interesting . . . .

Monday, July 28, 2008

Another boring economics post on . . . housing!

Paul Krugman has an interesting op-ed in today's NYT on the housing bill that's likely to be signed into law this week. Like many economists, Krugman seems to think that it offers a lot piecemeal remedies to the current housing crisis, but very little in the way of comprehensive reform of the mortgage industry.

Krugman's solution is, of course, to strong-arm mortgage originators into more vigorously screening applicants--compelling them to deny mortgages to the riskiest borrowers in order to protect the rest of us. And I must say, I don't necessarily disagree with this:

If the government is going to stand behind financial institutions, those institutions had better be carefully regulated — because otherwise the game of heads I win, tails you lose will be played more furiously than ever, at taxpayers’ expense.

If the government is going to be taking on billions of dollars in mortgage liability, of course it should force financial institutions to limit the amount of risk that they're exposed to. The issue is why the federal government is bailing out large investment banks like Bear Stearns with tax payer dollars in the first place. Aren't we setting an awfully scary precedent by doing this?

I can understand ensuring the liquidity of large government-sponsored enterprises like Fanny Mae and Freddy Mac (which are already intensely regulated by the Office of Federal Housing Enterprise Oversight), but why is the Federal Reserve now letting private investment firms off the hook for bad decisions?

I'm certainly not an expert on the mortgage industry, and I can't imagine how hard it must be for all of those families facing foreclosure, but it seems to me that if our goal is a little more humility from large financial institutions, it's probably a bad idea to tell them that they're basically too important to fail--no matter how badly they screw things up.