G.Nelson

Swagel, Phillip. "Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response †." Journal of Economic Perspectives 29.2 (2015): 107-22. Web.

Phillip Swagel, former Assistant Secretary for Economic Policy at the US Department of Treasury, discusses in his essay, “Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response,” that the US policymakers response to the 2007 and 2008 financial crisis was shaped by the limited legal authority and tools available to the US Department of Treasury and the Federal Reserve at that time, and how new tools and authority –access to public money and greater jurisdiction-- were made available because of the financial crisis’ “’unusual and exigent’” stresses upon the broader US economy (Swagel 107). The new tools and authority of the Treasury Department and the Federal Reserve were not imminent, but required the crisis to unfold more seriously, so that the policymakers could realize the economic emergency as more of a pressing issue and pass legislation that would grant the Fed and Treasury Department more tools.

The Treasury Department and the Federal reserve had the following tools at the ready, pre 2007 and 2008 crisis: Discount window was available for banks in need, discount in the federal funds interest rate, FDIC backing, and encouragement for investors not to fire sale their assets and to avoid foreclosure on properties. However, a majority of tools were not available for the investment or insurance institutions that held a substantial amount of subprime loans and derivatives. Swagel illustrates that the Federal Reserve’s and Treasury Department’s tools were not just underwhelming in their initial attempt at remedying the crisis, but they, also, initially underestimated the seriousness and complexity of the crisis, as did the policymakers.

At the collapse of Bear Stearns, the Treasury Department and Federal Reserve realized that more investment firms would soon collapse if new tools and authorities were not granted. Swagel illustrates that the Fed turned to its only ace in the hole: “emergency authority…[to] lend to ‘any individual, partnership, or corporation’” if a loss is not expected (Swagel 110-1). Even with the Fed’s ability to loan a limited amount of assistance, this legal authority did not give the Fed or Treasury Department direct access to public money, however. After Bear Stearns’ negotiated bailout with the Fed, it took nearly 6 more months, October 2008, to enact the “Emergency Economic Stabilization Act that created the Troubled Asset Relief Program [(TARP)]” (Swagel 111). Beforehand, the Treasury Department understood that even attempting to approach congress without a real-time economic crisis of illiquid assets and credit market seizures, congress would “loath” the idea of providing public funds to investment banks for bailouts.

Under the same tools of restraint and provisions that granted the Fed the option to bailout Bear Stearns, Swagel illustrates that it was the decision of the Fed not to bail out Lehman Brothers that led to an even tighter constraint on market liquidity and seizures within the credit market. With limited options from the Fed and Treasury Department, the unforeseen consequences of letting Lehman Brothers collapse exasperated the crisis further and put a constraint on debt markets, which affected normal government operations of securing debt. Two days after refusing to bailout Lehman Brothers, however, the Fed provided loan assistance to AIG, American International Group, an insurance company, because the Fed believed AIG to be more financially sound and important to the US economy. The deal between AIG and the Fed was not clean or clear, however, and the two are currently in litigation, today, from the deal struck in 2008. The same week of the AIG and Fed deal, TARP was proposed --which passed a few weeks later in October 2008-- and two more banks failed, WAMU and Wachovia (Swagel 117). With TARP, the Treasury Department would be able to provide financial support to the markets of $700 billion. Swagel illustrates that if the Fed and Treasury Department had the tools earlier and the foresight, the crisis could have been more contained, but the policymakers would not have been able to justify the $700 billion cost of TARP without such a monumental crisis.

Swagel contends that if another financial crisis happens relatively soon, the Fed and Treasury Department will be limited in how they can intervene because of the 2010 Dodd-Frank financial reform bill and the expenditure of an already lowered interest rate by the Fed. Politicians stumped on the promise of not bailing out businesses that were “too big to fail,” so the likelihood of congress approving another direct infusion of funds, such as TARP, would be improbable, but with the Dodd-Frank act, governments may be able to seize businesses directly to control operations and direct the losses onto the bond holders and investors, which will limit the loss to the taxpayer because of new FDIC provisions. Swagel states that by studying what happened from the 2007 and 2008 collapse, a more effective response may be garnered in a future crisis.

G.Nelson

Adam S. Weinberg, a professor of sociology at Colgate University, partnered with Peter Cann, executive director of the Madison County (New York) Industrial Development Agency, on a project called “Hamlets of Madison County.” The project aimed to reinvigorate the rural hamlets of central New York, with populations of roughly 500-1,800.

Weinburg’s real-world work led to a theory of sustainable rural economic development, which he outlines in “Sustainable Economic,” Development,” published in the Annals of the American Academy of Political and Social Sciences in 2000.

Weinburg identifies “high road” firms as a critical component to rural economic success. High-road firms employ “the best workers and latest technology to yield products with a high value” (Harrison 1997; Thurow 1996, Kanter 1995). The work is carried out in smaller facilities, making components for larger products across geographic regions, which then supports a global network of production.

Essentially, companies in rural areas would make small items to contribute to larger projects — such as electric conduit for engineering work. They would do so without greatly increasing their environmental or social footprint in the community, but rather hiring local and regional talent and expanding upon current industry in high-paying jobs. The leaders of these companies also have existing ties to the community, which would keep them from relocating to a different area once established.

In attracting, or encouraging, high-road growth, there are three critical elements: Human capital (educated or highly trainable employees); physical infrastructure (communication and transportation, like high-speed data transmissions and access to airports); and adequate financing (including grants, bank financing and seed start money).

A community also needs to have an “Entrepreneurial Social Infrastructure,” or ESI, defined by Flora, Sharp and Flora as “a bundle of factors contributing to a locality’s ability to respond to challenges in a rapidly changing context.” That might mean industry and education teaming up to identify the most important areas to focus on for job growth. It certainly means differing factions joining together for the good of the community.

Weinburg says that local mobilization won’t happen without “social chance” — an idea expanded upon by the British sociologist Sibeon. Social chance is an event like two people meeting at the right place and right time, or a focusing event like a disaster. Social chance can be encouraged through local mobilization, or the opportunity to organize and synthesize competing ideas.

But even with these elements in place, a community first needs incentive, which can be either monetary (jobs, better schools, improved infrastructure) or less tangible — hope, he writes, is a good incentive.

Small communities are often resistant to change, Weinburg writes. They have seem economic growth efforts come and go, and suffered with consequences, such as effects from natural resource extraction, industrial waste and prisons. Small communities are also committed to their lifestyle and quality of life, so an influx of new employees and development is unappealing. There are also often competing and loud factions preventing different developments, out of fear of change or to promote their own projects.

High-road development solves at least some of that, Weinburg writes — it allows a town to stay small and capitalize on what already exists, thus contributing to their own economy and the global market.

As for Madison County, it’s a work in progress. The county has hired a consultant to assist with writing grants, but much of her time gets wrapped up in local politics. The businesses it has have grown, but only one is flirting with larger growth through contracting.

“A start has been made,” Weinburg writes. “… Sufficient organization and resources are available to suggest that production for the global market is not out of the question. One day, it might be possible to point to this county in central New York as an example of how a rural area can restructure itself to become an active agent of globalization.”

The fate of rural economic development is important to our policy report, as we will focus, at least in part, on the influence of economic development engines and organizations like the Small Business Association, which support entrepreneurialism and growth.

This is an article from June 11, 2015 edition of the Economist about the future of cities located in the Midwest of the United States that are suffering from post-industrial economic decline. The three cities that are analyzed are Gary, Indiana, South Bend, Indiana, and Galena, Illinois. All three of these cities have historical roots consisting of economic policy centered on industrial employment. However, as U.S. manufacturers have gone out of business or outsourced production to foreign countries, cities all over the nation, but particularly in the Midwest, have seen never before rates of vacant buildings, unemployment, high school drop-out rates, and crime. For survival, industrial cities must reinvent themselves by focusing on economic diversification anchored on fundamentals: geographical location to attract tourism and new business and to fiscally focus on institutions like universities and hospitals. Additionally, dependence on a single employer for a city has proven to be too risky as an economic plan; multiple businesses and new industries must be present in an increasingly volatile, non-heavy manufacturing market.

Galena, Illinois is an example of a post-industrial city that has reinvented itself as a National historic site that attracts more than one million visitors per year. Galena met its post-industrial decline much earlier than many other Midwestern cities; by the end of the 19th century, it had gone from a busy metropolis competing in size with Chicago, to a ghost town. However, due to some clever economic planning during the 1960’s, city planners invested in historical preservation and put Galena back on the map as a tourist destination.

South Bend, Indiana is another example of post-industrial survival. The Studebaker headquarters were located in South Bend until the company officially went out of business in 1963; it became a “company town without a company”(Economist, 2015). Fortunately, South Bend had 2 important economical anchors that have kept the city afloat: Notre Dame University and Memorial Hospital of South Bend. Although South Bend has seen huge increases in unemployment and poverty since the 1960s, these 2 key institutions have kept the city viable. Currently, the mayor is trying to lure technology companies to South Bend with tax incentives, inexpensive power, and the geographical location of a cool climate (ideal for manufacturing technological components).

By comparison, Gary, Indiana has not fared as well as Galena or South Bend; Gary is a smaller version of Detroit, Michigan. Gary has some 5,000 abandoned buildings (about ¼ of all buildings); this is an eyesore and attracts criminals. After a change in Indiana’s property tax rules one year ago, Gary lost more than half its annual budget; this meant the city faced shutting down half of the services it could offer. The current mayor of Gary, Ms. Freeman-Wilson pleaded with the White House for Gary to be a recipient of the “Strong Cities, Strong Communities” initiative, which gave Federal funds to the 7 most distressed cities in the nation. Presently, Gary has received $6 million in state funds for building demolition, and the mayor has applied for a $21 million federal transportation grant. Gary will focus its economic policy to invest in becoming a transportation hub, being located right on Lake Michigan and just 24 miles away from Chicago (America’s third largest city).

To read how semiconducting nanotubes can be used to potentially improve eyesight click here:

http://www.acs.org/content/acs/en/pressroom/presspacs/2014/acs-presspac-november-12-2014/artificial-retina-could-someday-help-restore-vision.html

To read general information on nanotechnology click on the following link:

http://www.nano.gov/nanotech-101/what/definition

The following article is an interestng example of using nanotechnology to create jewelery:

http://www.nytimes.com/2014/11/18/style/international/jewelry-nanotechnology.html

Possible Therapy? Find out what the author Dr. Yamauchi says in this regard.

http://www.futurity.org/flu-virus-capsid-789992/

surprise, surprise

WTF WHY DO WE HAVE QUOTAS FOR OUR PRISONS?!

Read more about this research in these two news articles: DNA Analysis Indicates Domesticated Dogs Originated In Europe

http://www.redorbit.com/news/science/1113004478/domestic-dogs-from-europe-dna-analysis-111513/#MkuDjF53wbrGoqcb.99http://www.redorbit.com/news/science/1113004478/domestic-dogs-from-europe-dna-analysis-111513/

DNA hint of European origin for dogs

http://www.bbc.com/news/science-environment-24946944

Check out a Science special issue on Dogs: http://www.sciencemag.org/site/extra/dogs/

Wolves were domesticated much earlier than thought. Researchers discovered that wolves were domesticated by European hunter-gatherers between 19,000 and 32,000 years ago. The analysis cannot, however, be used to determine the origin of the dog, argues a Danish DNA scientist.

http://sciencenordic.com/wolves-became-domesticated-dogs-much-earlier-thought

THIS

I hope that the focus on prohibition by the drug policy reform movement helps sidestep a similar effect happening with cannabis.

list of institutions with open access policies

The value of a unit depreciates with time (normalized for any trend in overall prices). That's a very different scenario than taxes.

The issue with this paragraph is that it assumes regulation is not to blame for the high cost of affordable housing. It may well be the case that it is.

But what is that potential, does it really exist?

Identify where/how this ground is established.

Policies and procedures are barriers, but there are many more barriers beyond that which get in the way first.