Gov't Jobs Pay Better Than Private Sector
CBSNews.com
Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations, a USA TODAY analysis of federal data finds.
Accountants, nurses, chemists, surveyors, cooks, clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector, the newspaper reported.
Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.
The federal government spends about $125 billion annually on compensation for about 2 million civilian employees.
Read more of the story.Financial Crisis Inquiry Commission: Day by Day Coverage
By Michael Martin of CBS MoneyWatch.com.
Modeled structurally on the 9/11 Commission, the bipartisan, congressionally appointed panel will issue a report in December 2010 on the causes of the crisis, and has the option to provide recommendations for reform. According to Chairman Phil Angelides, its work is supposed to "serve as an antidote – much as the Pecora hearings did in the 1930s — to the kinds of market practices that none of us would want to see repeated ever again."
Below, highlights from the hearings.
Day 2: Critical but Yawn-Inducing
Thursday, January 14, 2010 — 4:37 p.m.
The second day of the Financial Crisis Inquiry Commission lacked the fireworks of the first. Testimony from key regulatory agencies: the Securities and Exchange Commission, the Federal Deposit Insurance Commission and the Department of Justice. Questions centered on the regulatory agencies knowledge and capacity to act at various points during the housing bubble and the crisis that followed. The agencies were broadly in agreement on causes (housing bubble, leverage, poor underwriting, inadequate risk management, etc.) All supported more effective systemic regulation with a few differences in emphasis and structure.
In other words, important and critical but yawn-inducing. The video is available on C-SPAN and the submitted testimony at the Commission's Web site.
As important as the testimony was the commission's attempting to lay the groundwork to effectively investigate. Vice Chairman Bill Thomas confirmed in perfunctory ways that the SEC (Mary Schapiro) the FDIC (Sheila Bair) would soon finalize agreements with the Commission to share information. In what was clearly a planned move, he asked the Department of Justice (first Attorney General Eric Holder and later Assistant Attorney General Lanny Breuer) whether they could expect a similar agreement by the end of the month. There was some hemming and hawing that Thomas ultimately judged as "probably yes."
This is important. The Commission is unique in its ability to look across the various agencies and other participants in the crisis. One the key causes appears to be the interconnectedness of the problems and the gaps among regulators. As a result, getting full and early access to information from each agency is critical. Delays would be a disaster for the commission, which has to deliver its report by December 15. When the 9/11 commission had trouble getting access to the various agencies, pressure from the families of the 9/11 victims was key to overcoming the resistance. The Financial Crisis Commission has to work without the same public support.
Top 10 Metaphors at the Financial Crisis Inquiry Commission
Thursday, January 14, 2010 — 8:56 a.m.
With apologies to David Letterman.
While waiting for today's FCIC's hearings to begin I reviewed my notes and glanced through the statements of the commissioners from their initial announcement on September 17, 2009. Content aside — and now that the FCIC site is up, there is some content, I was struck by the range of metaphors used to frame the crisis. Nothing so far seems to have stuck.
This is interesting because one of the key challenges for the commission is to find a way to connect to people. This will not be easy without a coherent story line and imagery to complement and frame the data. It's also interesting to watch the competing metaphors. For example, early on many bankers were calling the confluence of events "a perfect storm" with "plenty of blame to go around."
Until something substantive takes hold, I thought I'd review some of the current metaphors that have surfaced.
10. What a Dog Returns To
• Brian Moynihan, Bank of America: "We ate our own dog food and we choked on it."
9. Hidden Bombs/Mission Impossible Theme
• Phil Angelides: "... We witnessed the implosion of our financial markets, yet the fuses for that cataclysm were undoubtedly lit years before. It is our job to diligently and doggedly follow those fuses to their origins."
8. The Illiad and the Odyssey
• Brooksley Born: "Some powerful financial instruments have begun to mobilize forces to prevent meaningful reform and return to business as usual. The country cannot afford to listen to the siren song of self-regulation and delay or weaken our response to the crisis."
7. Evicted from the Castle
• Keith Hennessey: "I hope to share some of my insider's view on what happened ... our task is now one of hindsight, where we know what happened."
• "There's a temptation in this kind of process to look for villains, and indeed some have already been found and locked up."
• "In Washington, the easiest solution is often to form an unruly political mob and march on Wall Street ..."
6. (Used to Be) A Wonderful Life
• Byron Georgiou: "We have proceeded far beyond the idyllic banking model of the local building and loan institution immortalized in the Jimmy Stewart classic Christmas movie "It's a Wonderful Life ... "
5. Intensive Care
• Sen. Robert Graham: "The guiding principle of this commission should be do no harm... "
• Financial Institutions are "not only in the intensive care ward, but in the ward for those who are closest to death."
4. Dr. Frankenstein's Lab
• Heather Murren: "The commission has critical role to play in bringing to life the facts surrounding the financial collapse... "
• "I hope to bring light into areas that have been obscured by complexity... "
3. Bubbling Tsunami
• Douglas Holz-Eakin: "It has been likened to a tsunami that swept across the American economy... "
2. This Might Hurt a Little
• Peter Wallison: "... The diagnosis determines the prescription."
And the No. 1 image comes from the vice chairman, Bill Thomas:
1. Lazarus Waking Up in an Infectious Wasteland after an Earthquake
• "... I appreciate a little more than I did before what Lazarus must have felt like... "
• "... we had an earthquake... and one of the inevitable factors with earthquakes is that there are aftershocks."
• "... we're becoming familiar with natural mutations of virus, with manmade viruses, computers and this one of a financial nature."
• "... are we going to be in a jungle? "
After today's hearings I'm going to ask my bartender friend to create a drink we'll call "the Bubbling Tsunami." Take away that punch bowl.
Day 1: Watching Lloyd Blankfein Get Mad
Wednesday, Jan. 13, 2010 — 9:29 p.m.
Spent the day at the opening hearings of the Financial Crisis Inquiry Commission. Fascinating for a variety of reasons, not least of which was watching Lloyd Blankfein get mad.
First, the background: The FCIC is a bipartisan commission tasked with examining the "causes of the financial and economic crisis." It's modeled in some ways on the 9/11 Commission. (They have subpoena power but seem inclined to ask nicely first. No subpoenas yet.) According to Chairman Phil Angelides, its work is supposed to "serve as an antidote – much as the Pecora hearings did in the 1930s – to the kinds of market practices that none of us would want to see repeated ever again."
Today, the commission heard testimony from three separate panels. The first and most interesting had Goldman Sachs Chairman and CEO Lloyd Blankfein, JPMorgan Chase Chairman and CEO Jamie Dimon, Morgan Stanley Chairman John Mack, and Bank of America CEO and President, Brian Moynihan making statements and taking questions under oath. (It was explained that this would be standard practice by the Commission.)
Phil Angelides, the Chairman, said the Commission would serve as "proxy eyes, ears and possibly voice" for the American people. Angelides was particularly impressive in his ability to redirect some of the diversionary cliches that have been used to describe the crisis, e.g. "perfect storm" or "lots of blame to go around."
"But was this a perfect storm or a man-made storm?"
"Maybe it's like the Orient Express. Everyone did it."
Vice Chairman Bill Thomas said he planned to ask questions "the way the American people would, in ways that they can understand it." This explains distracting asides – for example, I now know that in 1950s Southern California the goal for tenants: "Get anything" as a first house and wait for it to appreciate. Some called this blather.
I think Thomas is cannier than that. For example, the other commissioners had to prioritize a few questions because of their extremely limited time. Thomas simply said, "My questions are the New York Times' questions," and requested written responses to them. In one move he asked 10 questions, requested responses under oath, and enlisted the Times' help in checking the facts.
Perhaps he was trying to get under the skin of the CEO's. That seemed to work for Angelides. Largely in response to Angelides questions, Blankfein lit up the room with his energy, intelligence and occasional hints of aggression. Both Angelides and Thomas have to be sensitive to the risk that the hearings will turn into esoteric discussions of leverage and risk management practices at various points of the crisis. That would only weaken the commission's effectiveness and will come out as a result of the investigation anyway. The FCIC needs to establish a baseline for credibility, build a solid foundation of facts, and connect the housing crisis and it's aftermath to the country at large. Thomas' digression makes more sense in this context: "If you could get on the first rung you could get onto the second. That was America."
One memorable turn of phrase from Blankfein in discussion about negligence, market-making and norms of behavior before and after the crisis: "The standards at the time were different."
Let's make sure that's the truth.
More on MoneyWatch:
• FCIC: Members with Conflicts
• How Lehman's Fall Changed Your World
• By the Numbers: How Far We've Fallen
Modeled structurally on the 9/11 Commission, the bipartisan, congressionally appointed panel will issue a report in December 2010 on the causes of the crisis, and has the option to provide recommendations for reform. According to Chairman Phil Angelides, its work is supposed to "serve as an antidote – much as the Pecora hearings did in the 1930s — to the kinds of market practices that none of us would want to see repeated ever again."
Below, highlights from the hearings.
Day 2: Critical but Yawn-Inducing
Thursday, January 14, 2010 — 4:37 p.m.
The second day of the Financial Crisis Inquiry Commission lacked the fireworks of the first. Testimony from key regulatory agencies: the Securities and Exchange Commission, the Federal Deposit Insurance Commission and the Department of Justice. Questions centered on the regulatory agencies knowledge and capacity to act at various points during the housing bubble and the crisis that followed. The agencies were broadly in agreement on causes (housing bubble, leverage, poor underwriting, inadequate risk management, etc.) All supported more effective systemic regulation with a few differences in emphasis and structure.
In other words, important and critical but yawn-inducing. The video is available on C-SPAN and the submitted testimony at the Commission's Web site.
As important as the testimony was the commission's attempting to lay the groundwork to effectively investigate. Vice Chairman Bill Thomas confirmed in perfunctory ways that the SEC (Mary Schapiro) the FDIC (Sheila Bair) would soon finalize agreements with the Commission to share information. In what was clearly a planned move, he asked the Department of Justice (first Attorney General Eric Holder and later Assistant Attorney General Lanny Breuer) whether they could expect a similar agreement by the end of the month. There was some hemming and hawing that Thomas ultimately judged as "probably yes."
This is important. The Commission is unique in its ability to look across the various agencies and other participants in the crisis. One the key causes appears to be the interconnectedness of the problems and the gaps among regulators. As a result, getting full and early access to information from each agency is critical. Delays would be a disaster for the commission, which has to deliver its report by December 15. When the 9/11 commission had trouble getting access to the various agencies, pressure from the families of the 9/11 victims was key to overcoming the resistance. The Financial Crisis Commission has to work without the same public support.
Top 10 Metaphors at the Financial Crisis Inquiry Commission
Thursday, January 14, 2010 — 8:56 a.m.
With apologies to David Letterman.
While waiting for today's FCIC's hearings to begin I reviewed my notes and glanced through the statements of the commissioners from their initial announcement on September 17, 2009. Content aside — and now that the FCIC site is up, there is some content, I was struck by the range of metaphors used to frame the crisis. Nothing so far seems to have stuck.
This is interesting because one of the key challenges for the commission is to find a way to connect to people. This will not be easy without a coherent story line and imagery to complement and frame the data. It's also interesting to watch the competing metaphors. For example, early on many bankers were calling the confluence of events "a perfect storm" with "plenty of blame to go around."
Until something substantive takes hold, I thought I'd review some of the current metaphors that have surfaced.
10. What a Dog Returns To
• Brian Moynihan, Bank of America: "We ate our own dog food and we choked on it."
9. Hidden Bombs/Mission Impossible Theme
• Phil Angelides: "... We witnessed the implosion of our financial markets, yet the fuses for that cataclysm were undoubtedly lit years before. It is our job to diligently and doggedly follow those fuses to their origins."
8. The Illiad and the Odyssey
• Brooksley Born: "Some powerful financial instruments have begun to mobilize forces to prevent meaningful reform and return to business as usual. The country cannot afford to listen to the siren song of self-regulation and delay or weaken our response to the crisis."
7. Evicted from the Castle
• Keith Hennessey: "I hope to share some of my insider's view on what happened ... our task is now one of hindsight, where we know what happened."
• "There's a temptation in this kind of process to look for villains, and indeed some have already been found and locked up."
• "In Washington, the easiest solution is often to form an unruly political mob and march on Wall Street ..."
6. (Used to Be) A Wonderful Life
• Byron Georgiou: "We have proceeded far beyond the idyllic banking model of the local building and loan institution immortalized in the Jimmy Stewart classic Christmas movie "It's a Wonderful Life ... "
5. Intensive Care
• Sen. Robert Graham: "The guiding principle of this commission should be do no harm... "
• Financial Institutions are "not only in the intensive care ward, but in the ward for those who are closest to death."
4. Dr. Frankenstein's Lab
• Heather Murren: "The commission has critical role to play in bringing to life the facts surrounding the financial collapse... "
• "I hope to bring light into areas that have been obscured by complexity... "
3. Bubbling Tsunami
• Douglas Holz-Eakin: "It has been likened to a tsunami that swept across the American economy... "
2. This Might Hurt a Little
• Peter Wallison: "... The diagnosis determines the prescription."
And the No. 1 image comes from the vice chairman, Bill Thomas:
1. Lazarus Waking Up in an Infectious Wasteland after an Earthquake
• "... I appreciate a little more than I did before what Lazarus must have felt like... "
• "... we had an earthquake... and one of the inevitable factors with earthquakes is that there are aftershocks."
• "... we're becoming familiar with natural mutations of virus, with manmade viruses, computers and this one of a financial nature."
• "... are we going to be in a jungle? "
After today's hearings I'm going to ask my bartender friend to create a drink we'll call "the Bubbling Tsunami." Take away that punch bowl.
Day 1: Watching Lloyd Blankfein Get Mad
Wednesday, Jan. 13, 2010 — 9:29 p.m.
Spent the day at the opening hearings of the Financial Crisis Inquiry Commission. Fascinating for a variety of reasons, not least of which was watching Lloyd Blankfein get mad.
First, the background: The FCIC is a bipartisan commission tasked with examining the "causes of the financial and economic crisis." It's modeled in some ways on the 9/11 Commission. (They have subpoena power but seem inclined to ask nicely first. No subpoenas yet.) According to Chairman Phil Angelides, its work is supposed to "serve as an antidote – much as the Pecora hearings did in the 1930s – to the kinds of market practices that none of us would want to see repeated ever again."
Today, the commission heard testimony from three separate panels. The first and most interesting had Goldman Sachs Chairman and CEO Lloyd Blankfein, JPMorgan Chase Chairman and CEO Jamie Dimon, Morgan Stanley Chairman John Mack, and Bank of America CEO and President, Brian Moynihan making statements and taking questions under oath. (It was explained that this would be standard practice by the Commission.)
Phil Angelides, the Chairman, said the Commission would serve as "proxy eyes, ears and possibly voice" for the American people. Angelides was particularly impressive in his ability to redirect some of the diversionary cliches that have been used to describe the crisis, e.g. "perfect storm" or "lots of blame to go around."
"But was this a perfect storm or a man-made storm?"
"Maybe it's like the Orient Express. Everyone did it."
Vice Chairman Bill Thomas said he planned to ask questions "the way the American people would, in ways that they can understand it." This explains distracting asides – for example, I now know that in 1950s Southern California the goal for tenants: "Get anything" as a first house and wait for it to appreciate. Some called this blather.
I think Thomas is cannier than that. For example, the other commissioners had to prioritize a few questions because of their extremely limited time. Thomas simply said, "My questions are the New York Times' questions," and requested written responses to them. In one move he asked 10 questions, requested responses under oath, and enlisted the Times' help in checking the facts.
Perhaps he was trying to get under the skin of the CEO's. That seemed to work for Angelides. Largely in response to Angelides questions, Blankfein lit up the room with his energy, intelligence and occasional hints of aggression. Both Angelides and Thomas have to be sensitive to the risk that the hearings will turn into esoteric discussions of leverage and risk management practices at various points of the crisis. That would only weaken the commission's effectiveness and will come out as a result of the investigation anyway. The FCIC needs to establish a baseline for credibility, build a solid foundation of facts, and connect the housing crisis and it's aftermath to the country at large. Thomas' digression makes more sense in this context: "If you could get on the first rung you could get onto the second. That was America."
One memorable turn of phrase from Blankfein in discussion about negligence, market-making and norms of behavior before and after the crisis: "The standards at the time were different."
Let's make sure that's the truth.
More on MoneyWatch:
• FCIC: Members with Conflicts
• How Lehman's Fall Changed Your World
• By the Numbers: How Far We've Fallen
Some NYC Businesses Receive H1N1 Vaccine
(iStockphoto)
Some of New York's largest companies have received the H1N1 vaccine in the last week, BusinessWeek reports. They include Wall Street banks Citigroup, JP Morgan Chase and Goldman Sachs as well as New York University and Time Warner.
City health officials say the companies are not being given special consideration, but applied for the vaccine months ago as part of their preparation for the pandemic. In all, 29 companies requested the vaccine and 13 have been supplied with it.
"It's not that they received it over someone else, it's that they placed an order," Jessica Scaperotti, press secretary for New York City's Department of Health & Mental Hygiene, told BusinessWeek. "A lot of businesses hold vaccination programs for their employees. These locations are important vehicles for vaccinating people."
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In Tough Times, Kids Turn to Modeling
Need cash? Got kids? Put them to work.
Today's depressed economy is leading more parents to modeling and talent agencies – not for themselves, but for their kids, in the hopes that their looks can bring in some needed extra cash. Child models make as much as $125 an hour.
Modeling and talent agencies like Wilhelmina Kids and Teens in New York and Peak Models & Talent in Los Angeles say they have seen an increase in child applicants in the last few years, reports the Wall Street Journal.
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Today's depressed economy is leading more parents to modeling and talent agencies – not for themselves, but for their kids, in the hopes that their looks can bring in some needed extra cash. Child models make as much as $125 an hour.
Modeling and talent agencies like Wilhelmina Kids and Teens in New York and Peak Models & Talent in Los Angeles say they have seen an increase in child applicants in the last few years, reports the Wall Street Journal.
Continue »
Greenspan: Banks Shouldn't Be "Too Big to Fail"
(AP Photo/Lawrence Jackson)
"'Too big to fail' is a major problem," Greenspan said at The First Draft of History, a conference in Washington, D.C. "It has a major impact in the way investments are made."
There needs to be a fee or an additional tax, Greenspan said, or some way "to make no institutions too big to fail." Politically, however, he acknowledged that this was very unlikely to happen.
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One Year Later: The Vanishing American Consumer
(AP Photo/Seth Perlman)
There are plenty of good phrases to sum up the American consumer spirit of the past few decades — such as "Were you completely insane?" But what sticks in my mind is a bumper sticker I once saw displayed on a late-model Hummer hauling a trailer loaded with matching sparkle-painted $15,000 jet skis: "The one who dies with the most toys wins." I couldn't figure out why dying was key to the deal. But now I get it: There was no way that bozo could pay for so much crap in one lifetime — and his kids can't handle the bills either.
American consumers have awakened, bolt upright, with belated sticker shock ("I bought what!? I spent how much!?"), from a shopping spree that's arguably lasted since the early 1970s. That's when spending started to outpace economic growth, according to the federal Bureau of Economic Analysis. Credit cards proliferated. Easy credit based on rising real-estate and stock prices fed the delusion that we could go on consuming more than we produce forever. And it just got giddier after 1997, when consumer spending bubbled up from 67 percent to more than 70 percent of gross domestic product (versus 55 to 65 percent in more sober economies). "People are using their homes almost as a third income," an executive for a major lender told me in 2005, and she thought that was just fine.
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The U.S. Government MADE Money?
Last Friday, I noted that taxpayers had made money from TARP. Nobody was talking about this too much–maybe a little August-itis or attention on the Kennedy funeral. That changed yesterday, when the New York Times reported that profits from the eight banks that have fully repaid the government total nearly $4 billion. Can you hear me now?
Last fall, when then-Secretary of the Treasury Henry "Hank" Paulson and Federal Reserve Chairman Ben Bernanke conceived of TARP, the clock was ticking on the US financial system. It was a only a matter of days and weeks before both officials were lambasted by lawmakers and the public for creating a plan that rescued the institutions that got us into the mess. Whether you believe that Paulson was was a bully or a hero, the results of the initial TARP paybacks must give him some solace.
We already know that Big Ben Bernanke has been rewarded with another term for his role in helping to steer the economy during the worst crisis since the Great Depression. Adding to his props, today the Financial Times reports that the Fed has made $14 billion on a variety of activities.
Yes, this is a drop in the bucket relative to the trillions of dollars that the government has pumped into the system and I fully expect that there will be those who poo-poo the results. But given the circumstances, I would prefer that the government actually make money than lose it.
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(IStockPhoto)
Last fall, when then-Secretary of the Treasury Henry "Hank" Paulson and Federal Reserve Chairman Ben Bernanke conceived of TARP, the clock was ticking on the US financial system. It was a only a matter of days and weeks before both officials were lambasted by lawmakers and the public for creating a plan that rescued the institutions that got us into the mess. Whether you believe that Paulson was was a bully or a hero, the results of the initial TARP paybacks must give him some solace.
We already know that Big Ben Bernanke has been rewarded with another term for his role in helping to steer the economy during the worst crisis since the Great Depression. Adding to his props, today the Financial Times reports that the Fed has made $14 billion on a variety of activities.
Yes, this is a drop in the bucket relative to the trillions of dollars that the government has pumped into the system and I fully expect that there will be those who poo-poo the results. But given the circumstances, I would prefer that the government actually make money than lose it.
Continue »
Spider-Man Moves into the House the Mouse Built
(CBS/Disney/Marvel)
It's all about the numbers. Maybe it should be about the comic books, or the "fan boys" who flock to conventions such as the amazing crowded Comic-Con in San Diego in late July. But Disney's purchase of Marvel Entertainment is about dollars.
Disney, subject to approval from Marvel shareholders who are sure to love this windfall, plans to pay $50 dollars per share for Marvel, which was at 38 last week.
Behind the scenes lies a tale of personal triumph by two determined immigrants from Israel who worked hard and negotiated even harder. Marvel was literally bankrupt in 1997 and 1998, when Ike Perlmutter and Avi Arad managed to have their company, Toy Biz, take full control of the legendary comic books creator. To do that, they defeated Ronald Perelman and Carl Icahn, two of New York's most powerful tycoons, whose tug of war over Marvel left a federal bankruptcy court in Wilmington tied up in knots.
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Big Ben Again: Obama To Reappoint Bernanke As Fed Chairman
By reappointing Federal Reserve Chairman Ben Bernanke to another term, President Obama has chosen to dance with the devil he knows–that's a good idea. The economy is just starting to show signs of stabilization and changing course would be unsettling.
I was not a fan of Bernanke when he assumed his position. I thought of him as a Greenspan acolyte who far too often turned to easy monetary policy to solve problems. He didn't earn the name "Helicopter Ben" for nothing! In fact, I was critical of Bernanke until we were well into the eye of the storm. I thought that he and other officials waited too long to adjust monetary policy amid the gathering storm.
But after the barn door blew wide open, I warmed up to Big Ben. He went beyond the ordinary tools at the Fed's disposal and brought creativity to the crisis. I also like that he makes himself easily understood, a stark contrast to his predecessor.
Image by Flickr User RobInh00d, CC 2.0.
There are Bernanke critics, especially in Congress. Frankly, if lawmakers don't like him, I view that as a positive. Considering that the Fed Chair will serve four years, he may outlast some of his Congressional enemies. Once they get a chance to vent their bile, I expect that the Senate will confirm Bernanke without too much fanfare.
The big question that looms is how will the Fed under Bernanke extract the trillions of dollars it pumped into the cratering economy? Big Ben has taken pains to tell us that there is a plan afoot, but if history is any guide, we should expect that the Fed will overshoot its efforts. The central bank might act too quickly, choking off recovery, or too slowly, which could catalyze a period of inflation. I'm preparing for either scenario, but rooting for Big Ben & Co to get it just right.
This post originally appeared The Financial Decoder blog on CBS MoneyWatch.com. Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
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I was not a fan of Bernanke when he assumed his position. I thought of him as a Greenspan acolyte who far too often turned to easy monetary policy to solve problems. He didn't earn the name "Helicopter Ben" for nothing! In fact, I was critical of Bernanke until we were well into the eye of the storm. I thought that he and other officials waited too long to adjust monetary policy amid the gathering storm.
But after the barn door blew wide open, I warmed up to Big Ben. He went beyond the ordinary tools at the Fed's disposal and brought creativity to the crisis. I also like that he makes himself easily understood, a stark contrast to his predecessor.
There are Bernanke critics, especially in Congress. Frankly, if lawmakers don't like him, I view that as a positive. Considering that the Fed Chair will serve four years, he may outlast some of his Congressional enemies. Once they get a chance to vent their bile, I expect that the Senate will confirm Bernanke without too much fanfare.
The big question that looms is how will the Fed under Bernanke extract the trillions of dollars it pumped into the cratering economy? Big Ben has taken pains to tell us that there is a plan afoot, but if history is any guide, we should expect that the Fed will overshoot its efforts. The central bank might act too quickly, choking off recovery, or too slowly, which could catalyze a period of inflation. I'm preparing for either scenario, but rooting for Big Ben & Co to get it just right.
(CBS)
Continue »
"Cash For Clunkers": Did It Work?
(AP Photo/Darron Cummings)
On the sidewalks of the far west side of Manhattan, two well-dressed car salesmen are taking a break. Have they noticed a difference in their business since the government's "cash for clunkers" program began in July? "Oh, yes," says one, waving his cigarette. "Totally," echoes his colleague, between drags. "There was nothing going on before, and now we're being run off our feet."
Their bosses, who do not allow sales people to speak to reporters, would doubtless agree. Both Ford and GM gave the Car Allowance Rebate System (CARS), which gives vouchers worth up to $4,500 to consumers who trade in gas-guzzling cars for more fuel-efficient models, credit for a nice little boost. And certainly it's been great for the guys on the front lines. "We needed a shot in the arm and this is it," says Cody Lusk, president of the American International Automobile Dealers Association. "The problem was everyone had been sitting in the sidelines. It was like a flower wilting; cash for clunkers was like sprinkling a little water and the flower begins to revive."
Certainly the program, which ends today, was popular. The first $1 billion, which was supposed to last for months, was accounted for in less than a week. Congress, with a little grumbling from those worried about the cost, quickly poured in another $2 billion on Aug. 6. At a fundamental level, though, what did the cash for clunkers program really achieve?
Net Effect: 13 Percent Jump in Sales
Cash for clunkers had two stated goals: to get greener cars on the road, and to boost the auto industry, and by extension, the U.S. economy. And lo and behold, there are signs that it is working on both counts. The cars purchased under the program get, on average, almost 10 miles more per gallon than the ones being scrapped, and the industry has seen a nice little bounce.
Car sales in July were the highest since August 2008 and up 13 percent over June. Ford actually saw a small year-on-year increase, the first in almost two years, while GM's four core brands — Buick, Cadillac, Chevrolet and GMC — all did well. Indeed, GM announced recently that it was adding workers and shifts to help meet the increased demand created by CARS. At current trends, more than 11 million new cars and pickups will be sold this year — not much compared to the 16 million sold in 2005, but a lot better than the 9.5 million that was projected just a few months ago.
"A billion dollars for cash for clunkers looks dramatically more efficient, dollar for dollar, than anything else the Congress has passed yet," concluded Credit Suisse chief economist Neal Soss in an August assessment.
By comparing the program only to other government initiatives, however, Soss is setting a low bar. For one thing, at least some of the purchases are by people who would have been replacing their cars anyway. In that case, demand has not been created, it just has been moved up a few weeks or months. "We have crammed three to four months of normal activity into just a few days," Edmunds.com CEO Jeremy Anwyl wrote in an op-ed in early August.
Then there is the iron rule of subsidy: What helps one industry hurts another — in this case, those businesses that are not seeing sales because families have spent their available money on a new car. Retailers of, say, cashmere, have also been hard hit by the recession, but don't expect a voucher to buy expensive sweaters.
"We did not magically create more demand for these cars," says Jeffery Miron, a Harvard economics professor of libertarian sensibilities who is decidedly not a fan of CARS. "We are taking it from other consumers and reducing demand for all the other goods in the economy and transferring it to those who take advantage of the program."
(AP)
Beyond the economic impact, there's also an environmental component to the program. When the $3 billion is exhausted, roughly 600,000 vehicles will have been swapped for more fuel-efficient models, based on statistics released from the government so far. According to a study by Christopher Knittel of the Center for the Study of Energy Markets, that would reduce annual gas consumption in the United States by roughly 160 million gallons per year, lowering emissions of carbon dioxide, the most important element in the greenhouse gases that are implicated in global warming, by about 1.6 million tons a year.
While that may sound like a lot, consider that the United States consumes about 378 million gallons of gas a day, and released about 6.4 billion tons of greenhouse gases into the air last year. Of course, cleaner-running cars also spew fewer air pollutants such as carbon monoxide, nitrogen oxide, volatile organic compounds, benzene, formaldehyde, particulate matter, and other toxic materials that contribute to smog and respiratory disease.
Another criticism of the plan is that cash for clunkers is an expensive way to reduce carbon emissions. One estimate, by Henry Jacoby, co-director of the Joint Program on the Science and Policy of Global Change at MIT, is that CARS will reduce carbon emissions at a cost of about $160 a ton; Knittel puts the figure at $237 and possibly much more. By comparison, a ton of carbon on the European trading system goes for about $20 right now.
But while the direct environmental effect might be expensive and not necessarily huge, is it at least a meaningful step in the right direction? To answer that, one has to look at a more complicated picture. First of all, there is the environmental cost of manufacturing all those new cars; the process of making and transporting the average new car creates 6.7 tons of carbon dioxide. So that's about 4 million tons of carbon dioxide created right there if 600,000 cars are junked.
What's more, there is the "Mexico effect." As Matthew Kahn, an environmental economist at UCLA, notes, the North Atlantic Free Trade Agreement has, in effect, been a hemispheric cash-for-clunker program, as the United States and Canada ship used but sellable cars south of the border. If these are sent to the scrap heap instead, that means that many older and dirtier Mexican clunkers will stay on the road longer, reducing the gains of the slightly greener U.S. fleet.
Moreover, most of the the funds for cash for clunkers came by shifting money from the loan guarantee program for renewable energy, which is designed to make it easier to invest in and expand green energy projects. Unfortunately, there is no alternate universe in which to test whether there would have been more green for the buck had the money stayed where it was. But the point is that to determine the calculus of environmental impact, one has to go beyond the simple arithmetic of new cars and mileage standards. The most that can be said of cash for clunkers is that it probably has some modest environmental benefits, and that these will accrue over time — but at above-market cost.
The Bottom Line
We've certainly done dumber things with our money in the name of greenery than the CARS program — see, for example, ethanol. And because cars are big-ticket items, a $4,500 subsidy generates many times that in actual expenditure and produces useful ripple effects in related industries such as steel and auto parts; that is the very definition of stimulus.
Both the anecdotal and macro evidence suggests that CARS has gotten people to venture into the showroom. And even if all cash for clunkers has done is accelerate buying rather than creating new demand, that's a useful step away from the dreaded "liquidity trap" — essentially, the fear of spending, which in itself creates the conditions for prolonged economic doldrums. Luring pent-up demand into the dealerships sooner rather than later is a sensible way to nudge the Great Recession closer to an end.
But there is no free lunch here. Those Americans who do not own a car or whose car does not qualify for CARS — and that means about 99 percent of you — are paying for those who do. Strip away the green fig leaf, and this is free money to a small number of households, and a taxpayer gift to a politically powerful industry. But in an era of vastly more expensive bailouts to vastly less popular industries, not to mention lots of stimulus money that has been allocated but not spent, CARS, on balance, looks like a modest success.
But enough already. A $3 billion gift to a small portion of the population that gooses the economy a bit and brings trivial environmental benefits may be justifiable. Any more is not.
More on MoneyWatch:
• 6 Big Myths about Gas Mileage
• 5 Sneaky Tricks from 'Cash for Clunkers' Dealers
• Skip the Hybrid ... for a Diesel?
• Cash For Clunkers: 5 Things No One Tells You
Global Economy in Danger of Backslide?
(CBS/AP)
That's what Nouriel Roubini, an economics professor at Stern School of Business at NYU, wrote in a Financial Times op-ed Sunday. In forecasting just what sort of recovery the world will embark on – a quicker "V-shape" or slower "U-shape" – Roubini raises the prospects of a possible "W-shaped" rebound, which will see near-term growth followed by another recession.
What might cause this? Roubini writes that the exorbitant deficits countries like the U.S. are currently running up pose a dilemma for lawmakers. They could raise taxes and cut spending, but that might squelch the recovery before it really gets a chance to begin. They could also ignore deficits and risk a recovery-suppressing bout of inflation.
There's also the fact that food and energy price are on the rise – at a rate higher than the economy warrants, Roubini writes – and there's reason to fear they may get even higher. With a lot of extra cash on hand, thanks to taxpayer-financed bailouts, traders might speculate on commodities (remember when oil topped $145 a barrel?). But a spike of that amount could lead to a similarly prodigious shock to the world economy.
In all, Roubini sees a "U-shaped" recovery, meaning slow growth that could take a couple of years. But the dangers of a "double-dip recession" are out there.
Cooking Show Ratings Heat Up
(CBS/The Early Show)
The Food Network's prime-time numbers have more than doubled since 2004, and the recent season finale of "The Next Food Network Star" was the channel's most-watched show ever. The second season start of "Man v. Food," a Travel Channel show that involves watching host Adam Richman eat (and eat…), was watched by 1.25 million households.
These programs, and many others, don't look anything like typical cooking shows. They've successfully borrowed ingredients from reality TV, like exotic locations and judged competitions. In fact, as the real estate market continues to fumble, food shows are happily replacing home makeovers as the newest spectator sport. Within the last year, TLC has dropped "Trading Spaces" and "Flip that House" and added another cooking show, "Ultimate Cake Off."
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JetBlue Grounds "All You Can Fly" Deal
(AP Photos/Bebeto Matthews)
The company began selling the $599 pass last week. It allowed for unlimited travel to the carrier's 56 U.S. and international destinations from Sept. 8 through Oct. 8. All open seats were included with no blackout dates, though tickets were based on availability and had to be booked at least three days in advance.
"We wanted to ensure those who bought the pass could get the flights they want, so we capped the number of passes we would sell," JetBlue spokeswoman Jenny Dervin told Reuters. "And we reached that number yesterday."
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Buffett: Watch Out for "Greenback Emissions"
(AP Photo/Nati Harnik)
Buffett, the CEO of Berkshire Hathaway, wrote in a New York Times op-ed piece that while he supports the government stimulus plan, the country must be on guard against "greenback emissions" – the residual effects of increasing debt that could plague the nation down the road.
Buffett writes that "enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."
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