A roundup of economic news from around the Web.
- Stimulus Expenditures: Writing for voxeu, Joshua Aizenman and Gurnain Kaur Pasricha say that stimulus expenditures are less than you might think. ” The crisis led to significant fiscal stimulus efforts by the U.S. government to offset the downturn. But this column argues that, properly adjusted for the declining fiscal expenditure of the fifty states, the aggregate stimulus was close to zero in 2009. While a net decline was avoided, the stimulus did not raise aggregate expenditure above its predicted mean. This can explain the anaemic reaction of the U.S. economy to the alleged big federal fiscal stimulus.”
- Kohn: On the Baseline Scenario, James Kwak isn’t sorry to see Don Kohn leave the Fed. ” Lets not mince words. Kohn was one of the leading cheerleaders for the Greenspan Doctrine. Heres one example. In 2005, Raghuram Rajan gave a now-famous paper at the Feds Jackson Hole conference warning of the impending financial crisis. Kohn gave a response, which we describe this way in 13 Bankers: Fed vice chair Donald Kohn responded by restating what he called the Greenspan doctrine. Kohn argued that self-regulation is preferable to government regulation (the actions of private parties to protect themselves . . . are generally quite effective. Government regulation risks undermining private regulation and financial stability); financial innovation reduces risk (As a consequence of greater diversification of risks and of sources of funds, problems in the financial sector are less likely to intensify shocks hitting the economy and financial market); and Greenspans monetary policy resulted in a safer world (To the extent that these policy strategies reduce the amplitude of fluctuations in output and prices and contain financial crises, risks are genuinely lower). Kohns conclusion reflected the prevailing view of Greenspan at the time: such policies [recommended by Rajan] would result in less accurate asset pricing, reduce public welfare on balance, and definitely be at odds with the tradition of policy excellence of the person whose era we are examining at this conference. Now this does not mean that Donald Kohn is a bad person; it just means that he was wrong, along with Alan Greenspan and Ben Bernanke. If recent accounts are to be believed, he, like Bernanke, was relatively quick to shift gears when the crisis exploded and figure out effective responses, for which he deserves credit. (He also oversaw the stress tests, for better or worse.) But from where Im sitting, the fewer members of the old guard, the better.”
- Payday Lenders: Felix Salmon posts a chart showing lobbying expenditures by payday lenders have exploded. “The meat of the story, though, from Keith Epstein of the Huffington Post Investigative Fund, is well worth reading: it shows an astonishingly effective lobbying organization which has persuaded lawmakers around the country that payday lenders are both popular in their local communities and not particularly profitable. One of the biggest payday-lender lobbyists calls itself the Community Financial Services Association; it increased its spending by 74 percent over the past year, to $2.56 million. That helps pay for people like Steven Schlein, who goes around saying things like Whos going to make that kind of credit available to working people besides us?. (Answer: banks, community development credit unions, non-profit lenders, etc. And if that kind of credit is being extended at 650% APRs, then maybe it shouldnt be made available at all.)”
Compiled by Phil Izzo