Archive for September, 2008
September 30th, 2008 - A quote from Tony Blair’s last day as PM
I think of Blair very much the same way as I think of LBJ–as a great man of many important accomplishments who made a tragic mistake with respect to a war whose implications he didn’t understand. On his last day in office, he said:
“Some may belittle politics but we who are engaged in it know that it is where people stand tall. Although I know that it has many harsh contentions, it is still the arena that sets the heart beating a little faster. If it is, on occasions, the place of low skulduggery, it is more often the place for the pursuit of noble causes.”
I have been thinking about yesterday’s vote in the House. Like Paul Krugman and Brad Delong and Mark Thoma, all of whom I admire, had I been in Congress, I would have held my nose and voted for the deal, which has many aspects I didn’t like.
But the press today has been about the venality of members who were afraid to vote for the plan because it is unpopular with voters. Having had some conversations today with friends who are to the left of me, and who opposed the plan, I think that the votes against the plan may well have been sincere votes, dictated not by expediency but by principle. Many Democrats view the plan as having insufficient consideration for consumers, and many Republicans genuinely find the idea of socializing risk to be anathema. As it happens, I disagree with this Republican point of view, but in this instance it is honest and defensible (although I think the business about cutting capital gains taxes is nonsense).
So while I think Congress made a mistake yesterday, I find it entirely plausible that the vast majority of members, on this one particular occasion, voted with their heads and hearts,
September 30th, 2008 - A quote from Tony Blair’s last day as PM
I think of Blair very much the same way as I think of LBJ–as a great man of many important accomplishments who made a tragic mistake with respect to a war whose implications he didn’t understand. On his last day in office, he said:
“Some may belittle politics but we who are engaged in it know that it is where people stand tall. Although I know that it has many harsh contentions, it is still the arena that sets the heart beating a little faster. If it is, on occasions, the place of low skulduggery, it is more often the place for the pursuit of noble causes.”
I have been thinking about yesterday’s vote in the House. Like Paul Krugman and Brad Delong and Mark Thoma, all of whom I admire, had I been in Congress, I would have held my nose and voted for the deal, which has many aspects I didn’t like.
But the press today has been about the venality of members who were afraid to vote for the plan because it is unpopular with voters. Having had some conversations today with friends who are to the left of me, and who opposed the plan, I think that the votes against the plan may well have been sincere votes, dictated not by expediency but by principle. Many Democrats view the plan as having insufficient consideration for consumers, and many Republicans genuinely find the idea of socializing risk to be anathema. As it happens, I disagree with this Republican point of view, but in this instance it is honest and defensible (although I think the business about cutting capital gains taxes is nonsense).
So while I think Congress made a mistake yesterday, I find it entirely plausible that the vast majority of members, on this one particular occasion, voted with their heads and hearts,
September 30th, 2008 - Coleman, Lacour-Little and Vandell argue that house prices made sense until 2004
The abstract of their new paper:
The cause of the “housing bubble” associated with the sharp rise and then drop in home prices over the period 1998-2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998-2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998-2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans. However, we do find strong evidence that a credit regime shift took place in late 2003, as the GSE’s were displaced in the market by private issuers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a “bubble” were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the “tail“) of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the “dog”).
This result is hardly consistent with the charge that the GSEs were the principal source of the problem. It also says something about having a purely private mortgage market.
September 30th, 2008 - The Fannie/Freddie Conservatorship seems to be working OK
Let’ see:
-Interest rates on conforming loans have dropped substantially, helping both homebuyers and sellers in the conforming market. Underwriting standards, though., remain more stringent (good in the long run, perhaps not so good in the short run).
-Senior management got removed without golden parachutes
-Shareholders get largely, but not entirely, wiped out
-The taxpayer, holding 80 percent of the company, gets susbstantial particiation in any upside (which in F&F’s case, I think likely).
On net, this looks pretty good. It also looks kind of like Sweden’s temporary nationalization of its banking system in 1992, which worked pretty well.
September 30th, 2008 - LA House Prices again
Brad Delong has the Case-Shiller house price index for LA going back to 1987 on his blog today. Nominal house prices are now about double what they were in 1987, for an annualized growth rate of about 3.3 percent. Sounds reasonable to me.
September 30th, 2008 - LA House Prices again
Brad Delong has the Case-Shiller house price index for LA going back to 1987 on his blog today. Nominal house prices are now about double what they were in 1987, for an annualized growth rate of about 3.3 percent. Sounds reasonable to me.
September 30th, 2008 - The Fannie/Freddie Conservatorship seems to be working OK
Let’ see:
-Interest rates on conforming loans have dropped substantially, helping both homebuyers and sellers in the conforming market. Underwriting standards, though., remain more stringent (good in the long run, perhaps not so good in the short run).
-Senior management got removed without golden parachutes
-Shareholders get largely, but not entirely, wiped out
-The taxpayer, holding 80 percent of the company, gets susbstantial particiation in any upside (which in F&F’s case, I think likely).
On net, this looks pretty good. It also looks kind of like Sweden’s temporary nationalization of its banking system in 1999, which worked pretty well.
September 30th, 2008 - The Fannie/Freddie Conservatorship seems to be working OK
Let’ see:
-Interest rates on conforming loans have dropped substantially, helping both homebuyers and sellers in the conforming market. Underwriting standards, though., remain more stringent (good in the long run, perhaps not so good in the short run).
-Senior management got removed without golden parachutes
-Shareholders get largely, but not entirely, wiped out
-The taxpayer, holding 80 percent of the company, gets susbstantial particiation in any upside (which in F&F’s case, I think likely).
On net, this looks pretty good. It also looks kind of like Sweden’s temporary nationalization of its banking system in 1999, which worked pretty well.
September 30th, 2008 - Can’t anyone play this game?
A few years back, I reads Robert Caro’s Master of the Senate. The thing about the book that most stuck with me was the political genius of Richard Russell. While he was a racist old bastard, he knew how to count votes, and he knew not to showboat in order to get votes. We could use his skills (if not his worst attitudes) right now.
September 30th, 2008 - Can’t anyone play this game?
A few years back, I reads Robert Caro’s Master of the Senate. The thing about the book that most stuck with me was the political genius of Richard Russell. While he was a racist old bastard, he knew how to count votes, and he knew not to showboat in order to get votes. We could use his skills (if not his worst attitudes) right now.