A Great Failure
Via Mark Thoma, the trillion-dollar gap:
It’s crucial to realize that the trillion dollars’ worth of goods and services we could have produced this year, but won’t, is a loss we’ll never make up. And that doesn’t count the suffering and damage to our future inflicted by the non-monetary costs of mass long-term unemployment.
And yet, the prevailing sentiment in Washington and other centers of power is that we’ve done enough, and that it’s time to start pulling back — to normalize monetary policy, tighten our fiscal belts. Policymakers are congratulating themselves for avoiding total collapse, when they should be berating themselves for failing to engineer recovery.
It’s tragic.
Fed’s No. 2 to Retire, Leaving 3 Vacancies on Board
WASHINGTON — Donald L. Kohn, the vice chairman of the Federal Reserve, who helped coordinate the central bank’s response to the financial crisis in 2008, told the White House on Monday that he would retire when his four-year term expires June 23.
His departure would bring to three the number of vacancies on the Federal Reserve’s seven-member board of governors, and gives the Obama administration the chance to significantly affect the governance of the Fed and its conduct of monetary policy. Mr. Kohn’s announcement also comes as the Senate is considering a vast overhaul of financial regulations that might include a reduction in the Fed’s powers to oversee banks.
Mr. Kohn, 67, began his career as a financial economist at the Federal Reserve Bank of Kansas City in 1970, before he completed his Ph.D. in economics the next year at the University of Michigan.
The White House said on Monday that Mr. Kohn’s decision to retire was "his alone" and that President Obama intended to name a successor before Mr. Kohn’s term ends in June.
In addition to replacing Mr. Kohn, President Obama also needs to fill two other vacancies that were created by the departures of Randall S. Kroszner in January 2009 and Frederic S. Mishkin in August 2008.
The vacancies are likely to spur a debate over the direction of monetary policy. With unemployment still near double digits and likely to remain high, there is sure to be pressure on the administration from liberals to nominate Fed governors who are willing to adhere not only to the central bank’s mission of price stability but also its mandate to work toward full employment — a goal that has become secondary to inflation fighting at the Fed over recent decades.
Mr. Obama’s selections are therefore likely to be viewed for hints as to whether he favors moving aggressively to choke off potential inflationary pressures before they take root, or to take a more wait-and-see attitude that might allow the economy to grow faster and create more jobs while also risking some inflation.
The policy-making board has historically needed at least five members to take action. But after the terrorist attacks of Sept. 11, Congress amended the Federal Reserve Act to specify that the board could act with fewer than five members in “unusual and exigent circumstances.”
That authority was invoked in March 2008 when the board voted, 4 to 0, to approve an initial extension of credit to JPMorgan Chase for the purchase of the investment firm Bear Stearns.
The Fed’s chairman, Ben S. Bernanke has since told Congress that the Fed would gladly surrender its authority to use the clause to bail out individual companies, so long as the Fed retained the ability to make emergency lending programs to inject liquidity into the market.
As part of the regulatory overhaul, Congress is considering creating a “resolution authority” to dismantle large, systemically critical financial institutions in an orderly fashion. Such authority would mean that the Fed and the Treasury would not be pressured to bail out individual companies to avoid chaos in the markets.
When President George W. Bush named Mr. Kohn to the board of governors in August 2002, it was considered highly unusual, because appointments to the board had rarely come from within. Mr. Kohn became vice chairman in June 2006, succeeding Roger W. Ferguson Jr.
“The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service,” Mr. Bernanke said on Monday. “Most recently, he brought his deep knowledge, experience, and wisdom to bear in helping to coordinate the Federal Reserve’s response to the economic and financial crisis.”
Mr. Bernanke, who was confirmed to a second four-year term as chairman in January after a grueling process in the Senate, also noted that Mr. Kohn had helped lead the stress tests of major financial institutions last year; directed the board’s efforts to improve transparency; and coordinated an effort within the Bank for International Settlements in Basel, Switzerland, to help central banks focus on their responses to the global economic crisis.
“On a personal note, I would like to express my deep appreciation for Don’s friendship and counsel during some very difficult times,” Mr. Bernanke said. “He will be greatly missed.”
Before joining the Fed board, Mr. Kohn was adviser to the board for monetary policy in 2001 and 2002; director of the division of monetary affairs, from 1987 to 2001; and deputy staff director for monetary and financial policy, 1983 to 1987.
He previously served the Federal Reserve’s division of research and statistics as associate director, 1981 to 1983; chief of capital markets, 1978 to 1981; and staff economist, 1975 to 1978. He was a financial economist in the Kansas City Fed from 1970 to 1975.
While Mr. Kohn’s term as vice chairman is for four years, he has a 14-year term on the board of governors through January 2016, but he is giving up that seat at the same time he steps down as vice chairman.
Crooks and Liars
Civil Suit Accuses Electronics Giants of Price-Fixing; DoJ Probe Continues
Way to go! (A similar Justice Department investigation in 2002 led to guilty pleas from top international manufacturers of computer DRAM.) Now, if only the DoJ would go after the cable companies, we'd have a Democratic majority in perpetuity...
A home electronics retail store has filed a class-action lawsuit against Sony Corp., Samsung Electronics Co. Ltd., Toshiba Corp., LG Electronics Inc., Hitachi Ltd. and several subsidiaries, accusing the electronics manufacturers of colluding to fix prices in the U.S. optical disc drive (ODD) market.
The lawsuit, filed Wednesday, also claims the disc drive manufacturers used trade organization forums to meet and discuss agreements to keep prices of CD, DVD and Blu-ray drives in products like the Sony PlayStation 3 and PCs artificially high.
[...] Samsung, which has received subpoenas from the DOJ, said it had "no comment regarding price fixing on optical drives." Officials at Hitachi and Toshiba could not be reached for comment.
According to a report in the Wall Street Journal last fall, Hitachi and Toshiba also received subpoenas regarding the probe into ODD price fixing.
An investigation was launched last October by the U.S. Department of Justice (DOJ) into the market for optical disk drives for anticompetitive conduct. The DOJ subpoenaed Sony Optiarc America, which at the time said it intended to cooperate fully with the DOJ and other agencies in this inquiry."
According to one published report, the investigations goes well beyond just Sony, and involves other electronics manufacturers.
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