The Obama administration's financial reform plan proposes creating a category of "systemically important," or "Tier 1," financial companies that would be more heavily regulated than other companies, but also eligible for bailouts and other government intervention. Can Obama avoid the moral hazard of such an arrangement (akin to what happened with Fannie Mae and Freddie Mac) simply through strict regulation?
-- John Maggs, NationalJournal.com
4 responses: Peter Wallison, Alan Meltzer, Gary Burtless, Charles Calomiris
As time goes by and data piles up, the debate is heating up over whether President Obama's $787 billion stimulus bill is responsible for the apparent improvement in the economy. Economists John Cogan, John Taylor and Volker Wieland argued in the negative, based on their reading of income and spending data. The latest, fullest case from the White House came in an August speech by Council of Economic Advisers Chair Christina Romer. Do Cogan and his co-authors have enough data to draw the conclusions they do? How much hard evidence is there that the stimulus is affecting spending and investment?
-- John Maggs, NationalJournal.com
3 responses: Desmond Lachman, Charles Calomiris, William Gale
Does the country risk a renewed financial crisis if the reform process bogs down? How much moral hazard has been created by the rescue, and how soon must it be diminished to avoid excessive risk-taking by financial companies? Has that excess begun already? Would it be a bad mistake for Obama to allow Congress to dominate the legislative process on financial reform, as he did with health care? Or has the financial system healed enough, and are banks and investors chastened enough, to allow a deliberate process for reform that takes longer but yields a more far-reaching law?
-- John Maggs, NationalJournal.com
What do you think of Paul Krugman's lengthy and provocative argument "How Did Economists Get it So Wrong?" in Sunday's New York Times Magazine? Is his taxonomy of competing schools of macroeconomics a fair one? And his account of which failed and how? Krugman says the crisis points to a muddy future for economic theory and a greater legitimacy for behavioral economics, among other conclusions. Is he right?
-- John Maggs, NationalJournal.com
7 responses: James K. Galbraith, Martin Baily, Isabel Sawhill, Rob Atkinson, Charles Calomiris, Ted Truman, Jeffrey Frankel
