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  • Commentary posted January 28, 2016 by Norbert J. Michel, Ph.D. Obama's Misguided Solution to the Keynesian Crisis in Puerto Rico

    Treasury Secretary Jack Lew has sent a letter to the U.S. House of Representatives to update Congress on the Puerto Rican “debt crisis.” Lew is referring to the fact that Puerto Rico has buried itself under a mountain of debt that it’s struggling to repay. Aided by a special tax status, the island’s total debt doubled in the 1980s and 1990s, and has tripled since…

  • Commentary posted January 13, 2016 by Norbert J. Michel, Ph.D. The Other Glass-Steagall: The FOMC And The FDIC

    Democratic presidential aspirants Bernie Sanders and Hillary Clinton have dueling financial reform plans. Sanders wants to resurrect the Glass-Steagall Act; Clinton opposes the idea. Sanders thinks the repeal of Glass-Steagall caused the 2008 financial crisis. Clinton denies it. As I wrote in October, one problem with the theory that “repeal of Glass-Steagall caused the…

  • Issue Brief posted December 15, 2015 by Norbert J. Michel, Ph.D. Fascination with Interest Rates Hides the Fed’s Policy Blunders

    The Federal Reserve (Fed) has not changed its federal funds target rate since 2008. Such a policy is unsustainable in the face of market forces that change interest rates. This statement may seem surprising given the widespread belief that the Fed sets interest rates, but, in fact, the Fed does not set interest rates. As a matter of fact, the Fed does not set even the…

  • Commentary posted December 10, 2015 by Norbert J. Michel, Ph.D. The Fed's New Emergency Lending Rules: Not Far Enough, Not Surprising

    The Federal Reserve has just finalized its new rules for making emergency loans, as required by the 2010 Dodd-Frank Act. Supposedly, the authors of Dodd-Frank wanted to prevent the Fed from ever again making the kinds of emergency loans – relatively cheap ones to failing financial firms – that it made during the 2008 crisis. The Fed initially proposed its rules in…

  • Commentary posted November 20, 2015 by Norbert J. Michel, Ph.D. Monetary Policy Devils Are In The Details: Easy To Dismiss Ideas Too Quickly

    During the last debate Senator Ted Cruz, Ben Carson, Mike Huckabee and Senator Rand Paul all waded into monetary policy, a hot topic since the 2008 crisis. Predictably, the last few days have seen a flurry of news articles attacking their views. Some of these stories, such as Greg Ip’s, are quite thoughtful. But on balance they are too dismissive of legitimate policy…

  • Backgrounder posted November 16, 2015 by Norbert J. Michel, Ph.D. Fixing the Dodd–Frank Derivatives Mess: Repeal Titles VII and VIII

    “[I]n the popular press and to the average citizen, ‘derivatives,’ much like speculation, has become a dirty word, hindering informed discussion.” —Roberta Romano, Maryland Law Review, 1996 The 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act was Congress’s response to the 2008 financial crisis.[1] Titles VII and VIII of the act dramatically altered the way…

  • Commentary posted November 4, 2015 by Norbert J. Michel, Ph.D. Feds Just Can't Allow People To Save And Invest

    Two events from last week exemplify federal officials’ refusal to let people live their own lives and earn money as they see fit. One deals with the Department of Labor’s (DOL) new fiduciary rule, the other with the Securities and Exchange Commission’s (SEC) new rules for crowdfunding. The 2010 Dodd-Frank Act required the SEC to study the need for a new, uniform…

  • Issue Brief posted November 4, 2015 by Norbert J. Michel, Ph.D. Dodd–Frank and the Consumer Financial Protection Bureau Put Squeeze on Private Payday Lenders

    The 2010 Dodd–Frank Act authorized the Consumer Financial Protection Bureau (CFPB) to impose new regulations on payday lenders and other short-term credit providers, and these rules will likely harm millions of consumers. The act compounded this regulatory burden by effectively creating a variety of taxpayer-subsidized alternatives to private lenders in this market.…

  • Commentary posted October 27, 2015 by Norbert J. Michel, Ph.D. Congress eyes a new pot of money

    History proves that the U.S. Congress consistently excels in at least one thing: spending other people's money. Lawmakers regularly budget to spend more than they collect, and it rarely occurs to them that they should spend less. The latest example is the U.S. Senate's plan to "save" the highway trust fund. Congress has mishandled the fund — which, technically, isn't…

  • Issue Brief posted October 23, 2015 by Norbert J. Michel, Ph.D. U.S. Treasury Debt Is Not the Foundation of the Global Economy

    Congress is once again facing a decision on the debt limit. If lawmakers do not raise the $18.1 trillion limit by the end of October, the U.S. Treasury may not have enough cash on hand to meet all of its obligations as they come due.[1] If they do raise the limit, the Treasury will borrow more money by offering new debt—Treasury securities—for sale. For many in Congress,…

  • Issue Brief posted October 23, 2015 by Norbert J. Michel, Ph.D. Federal Reserve Dividend Reduction Deserves Thorough Debate

    In July, the U.S. Senate introduced a plan to offset new highway spending by reducing the dividend that the Federal Reserve pays to member banks. While it is still unclear exactly where this idea originated, an anonymous Democratic staffer recently referred to the dividend as “an unnecessary and wasteful subsidy.”[1] It now appears that the dividend reduction will go…

  • Commentary posted October 20, 2015 by Norbert J. Michel, Ph.D. Time To Move On (Again) From Glass-Steagall

    Between now and the Presidential election we’ll be treated to all sorts of wonderful fables about what caused the 2008 financial crisis and the best way to prevent another one. Most of these stories will rehash the same old spin that we’ve been hearing for years. The biggest whopper concerns the Glass-Steagall Act, the 1933 law that separated commercial and investment…

  • Backgrounder posted September 29, 2015 by Norbert J. Michel, Ph.D. Dodd–Frank’s Title XI Does Not End Federal Reserve Bailouts

    A stated purpose of the Dodd–Frank Wall Street Reform and Consumer Protection Act was to end the too-big-to-fail problem. In other words, the Dodd–Frank Act was supposed to protect taxpayers from saving insolvent financial firms in the future as they did during the 2008 financial crisis. Title XI of Dodd–Frank amended the Federal Reserve’s emergency lending authority to…

  • Commentary posted September 21, 2015 by Norbert J. Michel, Ph.D. Milking Banks For Highways, Part II

    Its August recess over, Congress must get down to business. And one key piece of unfinished business is the highway-funding bill. Congress has mishandled the Highway Trust Fund for decades. And since 2008, it has spent more money than it takes in for highway projects. Unfortunately, they’ve consistently handled the problem by employing their favorite solution: find…

  • Backgrounder posted September 16, 2015 by Gerald P. Dwyer, PhD, Norbert J. Michel, Ph.D. Bits and Pieces: The Digital World of Bitcoin Currency

    Bitcoin is an electronic currency that is neither issued by a government nor backed by a physical commodity. Bitcoin’s underlying technology allows users to transfer funds in an electronic payments network. Ultimately, the technology could have effects far beyond purchases of goods by, for example, improving processes that rely on time-stamped electronic records, such as…