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Washington Update

Fuld Criticises Fed for Letting Lehman Fail
September 2, 2010 | Financial Times
Dick Fuld, the former chief executive of Lehman Brothers, squared off against Federal Reserve officials and his former peers on Thursday as he argued that his investment bank could and should have been saved. Almost two years since the collapse of Lehman roiled markets, Mr Fuld mounted his most robust defence yet, accusing regulators in testimony to the Financial Crisis Inquiry Commission of pushing the bank into bankruptcy and failing to get a grip on the crisis early in 2008.
Christina Romer Farewell Speech
September 2, 2010 | National Press Club
The current recession has been fundamentally different from other postwar recessions. Rather than being caused by deliberate monetary policy actions, it began with interest rates at low levels. It is a recession born of regulatory failures and unsound practices that contributed to a housing bubble and eventually a full-fledged financial crisis. Precisely what has made it so terrifying and so difficult to cure is that we have been in largely uncharted territory.
Reid Revives Hope for Renewable Energy Standard
September 1, 2010 | Congressional Quarterly

Senate Majority Leader Harry Reid said Tuesday he may include a renewable electricity mandate in legislation that would impose new safety regulations on offshore drilling, reviving a requirement jettisoned from a broader energy bill earlier this summer. Reid said adding a renewable electricity provision to a narrow energy measure that would overhaul federal oversight of the outer continental shelf and boost production of natural gas and electric-powered vehicles could attract the support of two Republicans.

Obama Weighs Smaller Measures on the Economy
August 31, 2010 | New York Times
President Obama is weighing new steps to bolster the economy, he said Monday. But any measures he takes seem likely to be small ones, and his options are limited with Congress showing little appetite for more spending in a hotly contested midterm election year. With unemployment above 9 percent, and some economists warning of a double-diprecession, Mr. Obama and his fellow Democrats have been trying to make the case to voters that while the recovery is slow, the nation is moving in the right direction.
What Congress Might Do to Defuse Tax Time Bomb
August 31, 2010 | Wall Street Journal
President George W. Bush left behind a ticking time bomb that is set for Dec. 31, 2010. If Congress does nothing, taxes on wages, capital gains and dividends will leap, the estate tax will be resurrected at a 55% rate and the pesky alternative minimum tax will hit an additional 21 million taxpayers on 2010 returns. So what happens? Political gridlock, wavering Senate Democrats, deficit angst and a gnawing sense that the tax code is due for an overhaul could combine to make a one- or two-year extension of the Bush tax cuts—perhaps all of them, perhaps only those Mr. Obama likes—likely.
The Great Stimulus Debate
August 31, 2010 | Round Up in International Economy

For some months, there has been an intense debate over the appropriate fiscal stance going forward. Does economic weakness require more fiscal stimulus? Are large budget deficits holding back growth? Is it possible for fiscal consolidation—the latest preferred term for deficit reduction—to be expansionary? What follows is a selection of analyses and commentaries underlying the debate from the White House, CBO, Mark Zandi, John Taylor, Robert Barro, Jean-Claude Trichet, Paul Krugman, and Edward Glaeser.

Administration Releases Report on Options for Tax Code Overhaul
August 30, 2010 | Congressional Quarterly

The White House released a long-awaited report on Friday that outlines options for overhauling the tax code. The 126-page document, created by an offshoot of the President’s Economic Recovery Advisory Board, does not endorse any of the listed options and does not represent official White House policy. Instead, the group, led by former Federal Reserve Chairman Paul A. Volcker, tries to set out options for upcoming debates on taxes, including a long list of suggestions that would simplify the tax system, improve compliance and revamp the corporate tax code.

An Autopsy of Fannie Mae and Freddie Mac
August 27, 2010 | Economix
Fannie's and Freddie's regulator released a report yesterday on the financial condition of the government sponsored enterprises. There are a few key points. First, Fannie and Freddie did not cause the housing bubble. Second, the companies bought and guaranteed bad loans with reckless abandon. Their underwriting standards jumped off the same cliff as every other participant in the mortgage market.
Lawmaker Want Deficit Commission Co-Chair Ousted
August 26, 2010 | Congressional Quarterly
Two lawmakers called Wednesday for the ouster of the top GOP member of President Obama’s fiscal commission over controversial comments he made about Social Security. Sen. Bernard Sanders, I-Vt., and Peter A. DeFazio, a Democratic House member from Oregon, complained in an Aug. 25 letter to President Obama that former Republican Senator Alan Simpson has failed to meet a responsibility to be “serious, deliberate, and sober” when he compared, in an e-mail message, Social Security to a “milk cow” on which 310 million Americans feed.
2011-2012: Can You Spell Federal Budget Gridlock?
August 26, 2010 | Capital Gains and Games

Assuming there are no big changes between now and election day (that is over just 10 more weeks), Republicans either will have narrow majorities in one or both houses of Congress or the Democrats will have smaller majorities in the House and Senate than they have now. In general, that's not a situation conducive to compromises, cooperation, and large changes.