Top of the News: While Obama chief economic adviser Larry Summers was making millions giving speeches to the financial industry and shilling for a hedge fund, Harvard Professor Elizabeth Warren was quietly studying the decline of the middle class. Her work wasn’t always quiet in its findings: She led a breakthrough study a few years ago about the effect of inadequate health insurance in causing personal bankruptcies. Then Congress named her as chief watchdog of the bank bailout, and since then she’s been at odds with the likes of Summers, Tim Geithner and their predecessors in the Bush administration.
Now Warren is warning Congress that the $700 billion bailout is at best producing mixed results, and it’s relying on unrealistic economic assumptions. Her suggestion: Fire the top executives and carry out an orderly liquidation of the insolvent banks, according to Bloomberg, which first reported the story. You can read the congressional panel report here.
Warren has been outspoken in the need for more transparency in the way the Treasury and Federal Reserve are using taxpayer money to bail out large financial institutions. The need for this was underscored once we learned that bailout money for AIG went not only to bonuses, but also to “counterparties,” many of which were already getting TARP money. This as average folks were facing deferred or destroyed retirement hopes as a result of the financial meltdown. Not surprisingly, she’s critical of the Treasury’s sudden desire to pump bailout money into insurers.
Midweek bits: Americans love to drive and developers love to build office “parks” in less expensive suburban or exurban sites. What could possibly go wrong? Aside from the hours wasted commuting, there’s a future of higher energy prices, no easy substitute for the internal combustion engine, lack of mass transit for beltway office projects, abandoned center cities and rising environmental damage from sprawl — none of which is “costed” into job sprawl. The Brookings Institution has a new report showing that only 21 percent of employees in the largest 98 metro areas work within three miles of the central business district. More than 45 percent work more than 10 miles away from the city center. In Seattle, the number is 56 percent. The decentralization even picked up momentum after 1998.
— Two UC Berkeley professors have a fascinating, and scary, paper on comparisons between the current downturn and the Great Depression. They make a strong case that some aspects of our mess are potentially worse than the economy of the 1930s. A big difference is the deep global nature of today’s collapse. The U.S. can’t recover on its own with a worldwide drag.
— Robert Reich has a quick, entertaining look at what’s wrong with the way the Geithner plan benefits hedge funds while putting taxpayers at risk. Check it out here.
Today’s Econ Haiku:
Tuition goes up
Meritocracy goes down
You got your tax cut