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Wonkbook: Bernanke moves; WH opposes foreclosure moratorium; foreign money does enter campaigns


It's not paranoid if they're really out to get you, and it's not pessimism if you're, well, right. For months, a fairly small group of bears have been calling for Ben Bernanke and the Federal Reserve to accept the need for unconventional policy measures that could boost the economy. It began as a quixotic argument, became a minority position, and now, it's Bernanke's expressed plan.

So you'd think the folks calling for Fed action would be exultant. But they're not. The concern is that the Federal Reserve's bond purchases will be half-hearted. The Fed is uncomfortable using these tools, and has signaled an intent to be cautious. But if they're too cautious, the purchase won't be big enough to work. And if they don't work, the Fed will lose credibility with the market because its intervention will fail -- which will be much worse. The result? The pessimists are still, well, pessimistic, despite the fact that their policy recommendations are being at least partly followed. And they've been right to be pessimistic before.

It's Monday. Welcome to Wonkbook.

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Ben Bernanke signaled the Fed will buy bonds to help the economy, reports Neil Irwin: "If the Fed essentially prints money to buy bonds, as it is considering, it would help the economy by lowering long-term interest rates for home mortgages, corporate loans and other forms of lending. Forecasting firm Macroeconomic Advisers estimates that $400 billion in bond purchases would drive interest rates on 10-year loans down by 0.13 percentage points...He told an audience of economists and central bankers at a conference at the Federal Reserve Bank of Boston that the Fed 'is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate.'"

Paul Krugman fears this will be another half-measure:

Could Bernanke have explained his plan in a way more likely to help it succeed?

A foreclosure moratorium won't help families, writes HUD Secretary Shaun Donovan: "For instance, in Cleveland, where there are over 18,000 vacant homes, lives Millie Davis who recently earned her Master's Degree in Urban Planning from Cleveland State University and just bought her first home - one that had fallen into foreclosure and sat abandoned for years. Had a blanket moratorium been in place, that sale would have fallen through -- not only deferring her dream of homeownership but leaving neighbors on the block to stand by and watch as their property values continue to plummet. Right now, families who have watched their home values decline over the last few years want nothing more than homebuyers like Millie to buy the vacant homes in their neighborhoods."

Members of Congress who voted against the stimulus lobbied for funds from it:

Millions in foreign contributions are funding midterm campaigns, reports Dan Eggen: "Political action committees connected to foreign-based corporations have donated nearly $60 million to candidates and parties over the past decade, including $12 million since the start of 2009, federal contribution records show. Top donors in this election cycle include PACs tied to British drugmakers GlaxoSmithKline and AstraZeneca, which together account for about $1 million; Belgium's Anheuser-Busch InBev, at nearly $650,000; and Credit Suisse Securities, at over $350,000. The donations must come from U.S. citizens or residents, and they make up a small fraction of overall political giving."

The five people Obama should hire now:

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African drum sample interlude: The Avalanches remix "I'm a Cuckoo" by Belle and Sebastian.

Still to come: The foreclosure mess' damaging is rippling out further and further; behavioral economics is revolutionizing environmental policy; even Democrats want to change health care reform; and a corgi does a belly flop.


Everyone loses as the foreclosure mess continues, reports Brady Dennis: "As this deal and others like it languish, the effects are rippling across this community on Florida's west coast. Mamuyac has to continue paying rent for an apartment six miles down the road. Mamuyac's real estate agent hasn't been able to pocket his commission, nor has the seller's agent. Another home inspector loses out on work. This transaction is one of thousands in this area abruptly put on hold as lenders and state officials have sought to freeze foreclosures, a reaction to mounting reports of flawed and fraudulent paperwork and improper practices used to seize homes in foreclosure."

An undue emphasis on speed from foreclosure processors allowed the current mess to happen, report Ariana Eunjung Cha and Zachary Goldfarb: "Law firms competed with one another to file the largest number of foreclosures on behalf of lenders - and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors. And the big mortgage companies overseeing it all - including government-owned Fannie Mae - were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly."

The deficit shrank this year:

A weak dollar is boosting American manufacturing, reports James Hagerty: "Many U.S. companies--from coal miners to a producer of tugboat clutches--are seeing stronger demand in Europe and Asia as the weak dollar makes U.S. goods cheaper there. Economists say the dollar's swoon, which started in mid-September following a summer rally, will provide a modest boost for U.S. exports, but they caution that it means American consumers and businesses will pay more for imported goods and raw materials... In the absence of free-trade agreements, 'A weaker dollar is one of the few ways you can get exports going,' says Mr. Kantor, who thinks many U.S. energy, industrial and agricultural companies will benefit.

Republican Indiana Governor Mitch Daniels is under attack for embracing a VAT:

Only tariffs will stop China, writes Sherrod Brown: "Economists, including free-traders, estimate that price manipulation keeps Chinese products 40 percent cheaper than comparable American-made goods. Inexpensive products might sound nice, but we lose 13,000 net jobs for every $1 billion increase in our trade deficit. Our $226 billion deficit with China has meant shuttered factories, lost jobs and devastated communities across America. And it’s no longer just Chinese bicycles and electronics that are flooding our markets. China will soon make half the world’s wind turbines and solar panels, most of which it plans to export to America. And, as usual, China’s clean-energy industry relies on large government subsidies, in direct violation of international trade laws."

The Fed's tools for spurring a recovery are limited, writes Robert Samuelson:

China's protectionism extends beyond currency manipulation, writes Paul Krugman: "Last month a Chinese trawler operating in Japanese-controlled waters collided with two vessels of Japan’s Coast Guard. Japan detained the trawler’s captain; China responded by cutting off Japan’s access to crucial raw materials. And there was nowhere else to turn: China accounts for 97 percent of the world’s supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment. Sure enough, Japan soon let the captain go...Even before the trawler incident, China showed itself willing to exploit that monopoly to the fullest. The United Steelworkers recently filed a complaint against Chinese trade practices, stepping in where U.S. businesses fear to tread because they fear Chinese retaliation."

David Leonhardt hosts a debate on the Renmibi:

Reaction video interlude: Kids watch, react to "Double Rainbow", "viral videos.


Guilt is a powerful policy tool for helping the environment, reports Stephanie Simon: "The second paper described a study involving public-service messages hung on the doorknobs of several hundred middle-class homes in San Marcos, Calif...Some residents learned they could save $54 a month on their utility bill. Others, that they could prevent the release of 262 pounds of greenhouse gases per month. A third group was told it was the socially responsible thing to do. And a fourth group was informed that 77% of their neighbors already used fans instead of air conditioning, a decision described as 'your community's popular choice!' Meter readings found that those presented with the 'everyone's doing it' argument reduced their energy consumption by 10% compared with a control group.

Auto execs are still skeptical of electric cars, reports Mike Ramsey: "Takeshi Uchiyamada, Toyota's chief engineer, agrees that the biggest concern about electrics remains their driving range. Mr. Uchiyamada, who is considered the father of the Toyota Prius hybrid, said EVs likely will be confined to short-distance commutes while hybrid models will grow in usage... Ford thinks the future lies in cars with more efficient gas engines as well as plug-in hybrids that use small, rechargeable batteries augmented by gas engines. In 2020, Ford expects just 1% to 2% of its sales will be pure electrics, while 10% to 25% will be hybrids and plug-in hybrids, said Nancy Gioia, who leads the company's electric, hybrid-electric and plug-in hybrid programs."

The US is investigating China's clean energy subsidies, report Sewell Chan and Keith Bradsher: "the United States trade representative, Ron Kirk, said his office would investigate a complaint filed by the United Steelworkers, one of the nation’s largest unions, on Sept. 9. The complaint asserted that China had violated its obligations under the World Trade Organization. 'This is a vitally important sector for the United States,' Mr. Kirk said. 'Green technology will be an engine for the jobs of the future, and this administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs.'"

Geoengineering is worth a shot, writes Dana Milbank:

Fears about nuclear energy show how humans weigh risks irrationally, writes David Ropeik: "Radiation from nuclear power is human-made, and human-made risks evoke more fear than natural threats. Nuclear power plants can have accidents (many still believe that they can explode like bombs), and people are intrinsically more afraid of risks associated with a single large-scale “catastrophic” event than they are of risks that cause greater harm spread over space and time. Many people don’t trust the nuclear industry, or government nuclear regulators, and the less we trust, the more we fear."

Adorable animals getting wet interlude: A corgi does a belly flop.

Domestic Policy

Democrats are campaigning on reforming the health care bill, reports Sarah Kliff: "'I want to reform it and fix it and make sure that it works for small businesses and their families,' Alexi Giannoulias, the Democrat seeking President Barack Obama’s old Senate seat, said on 'Meet the Press' on Sunday. 'If you can fix it -- Democrats and Republicans agree on six or seven items -- that’s a pretty darn good start,' West Virginia Gov. and Democratic Senate candidate Joe Manchin told Fox News on Monday. 'I’d like to fix health care,' Democratic Kentucky Senate candidate Jack Conway said in a debate last week with Republican contender Rand Paul. 'He wants to repeal it. And I think that’s a stark difference.'"

Cultural explanations of poverty are gaining ground in the academy:

US sugar production could collapse next year, reports Bill Tomson: "U.S. sugar production will be cut by about 20% if farmers are banned from planting genetically modified beets next year, according to data prepared for the U.S. Department of Agriculture as part of a court case over whether to continue allowing the practice. Genetically modified beets have come to account for 95% of the U.S. sugar-beet crop in the five years since they were approved by the Agriculture Department. But in August, a judge threw out the USDA's initial approval for the use of genetically modified seeds, saying it hadn't done enough research into the environmental impact. The department says the studies the judge required will take about two years."

The White House was working on health care within days of taking office:

Campaign finance regulations force spending out of the light, writes Gillian Tett: "In theory, America is a country that prides itself on the idea that Congress serves 'the people', not just the rich. Thus there is moral outrage over the concept of 'buying the vote', and laws exist to prevent that: individual donations are capped; most donations need to be disclosed; and (until recently) companies could not give directly to politicians. However, precisely because these detailed laws exist - and because campaigning is a very costly business, subject to a permanent type of inflation-cum-arms race - in recent decades America has developed myriad practices to enable that cash to flow indirectly. The result is a dense shadowy network of middlemen, rent-seekers and ambiguous institutions that are complex and inefficient; if not, downright odd."

The federal government is expading a program that checks jails for illegal immigrants:

Gridlock is not an effective check on partisanship, write Jacob Hacker and Paul Pierson: "Gridlock will not bring the stability and compromise that pundits crave. It will result in a slow, quiet, yet inexorable erosion of government's capacity to effectively address the nation's problems. Nor will it foster centrist solutions. Instead, it will strengthen the hands of those who resist the very idea that government can or should address these big issues -- and who understand full well that blocking change in policy yields social and economic outcomes they favor. This was a major part of the political story of the 1980s and 1990s, when the capacity of government to act in support of America's middle class eroded steeply, and economic inequality festered."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Stephan Savoia Photo.

By Ezra Klein  | October 18, 2010; 6:39 AM ET
Categories:  Wonkbook  
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Next: Americans prefer tax increases to benefit cuts


"The US is investigating China's clean energy subsidies, report Sewell Chan and Keith Bradsher: "the United States trade representative, Ron Kirk, said his office would investigate a complaint filed by the United Steelworkers, one of the nation’s largest unions, on Sept. 9. The complaint asserted that China had violated its obligations under the World Trade Organization. 'This is a vitally important sector for the United States,' Mr. Kirk said. 'Green technology will be an engine for the jobs of the future, and this administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs.'"

China subsidizes clean energy and the U.S. government is upset? If climate change is such a problem why would we oppose clean energy subsidies in China?

Posted by: justin84 | October 18, 2010 9:43 AM | Report abuse

"Cultural explanations of poverty are gaining ground in the academy:"

It's only gaining ground now? I suppose progress is progress.

Not everyone who is poor is poor because of bad decision making. Luck certainly plays a role.

But if you are single, have six kids and didn't manage to graduate from high school, you are probably going to be poor.

Posted by: justin84 | October 18, 2010 10:04 AM | Report abuse

In case anyone missed it, Eggan's report regarding foreign contributions to political campaigns states that "U.S. subsidiaries of foreign companies [...] have shifted the tilt of PAC contributions to Democrats since Barack Obama took office, according to a Washington Post analysis."

While the statement that the Social-Democrats are using foreign money to finance their campaigns should have been the opening sentence, any degree of recognition of the fact is appreciated.

Posted by: rmgregory | October 18, 2010 11:00 AM | Report abuse

The money that you save by refinancing every month can be sensibly used to repay your unique loan or to upsurge your savings. Do not forget to search online for "123 Mortgage Refinance" they found 3.17% rate for me.

Posted by: rachelbilson19 | October 19, 2010 6:36 AM | Report abuse

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