Money Market Runs

A good oped in Bloomberg's "Business Class" series tackles money market funds. (I signed it along with the rest of the Squam Lake group, but I can't take credit for much of the writing.)

There was a run in money market funds. We have to do something about this.

Supreme court and health insurance part II

Yesterday's post morphed into a Wall Street Journal Op-Ed, reprinted below.

Why am I going on? I think too many people don't understand there is a coherent free-market, deregulated alternative. President Obama himself said today,

"I think the American people understand — and I think the justices should understand — that in the absence of an individual mandate, you cannot have a mechanism to ensure that people with pre-existing conditions get health care."   

This just isn't true. I don't blame Obama, but his health insurance advisers ought to know better. "Guaranteed Renewable," or "premium-increase insurance" is a possibility. It solves the genuine pre-existing conditions problem. It's been in the academic literature for almost 20 years (see e previous  Articles,  Opeds, Blog posts and citations in the Articles, especially to Mark Pauly's work and extensive coverage on Cato's health insurance and Universal Heath Care sites). A deregulated, competitive market can work. 

The WSJ Oped: 

Austerity, Stimulus, or Growth Now?

(This is also a Bloomberg "Business class" column, with minor improvements.)

Austerity isn't working in Europe. Greece is collapsing, Italy and Spain’s output is declining, and even Germany and the U.K. are slowing down. In addition to its direct economic costs, these “austerity” programs aren't even swiftly closing budget gaps. As incomes decline, tax revenue drops, and it is harder to cut spending. A downward spiral looms.

These events have important lessons for the U.S. Our government cannot forever borrow and spend 10 percent of gross domestic product each year, with an impending entitlements fiasco to boot. Sooner or later, we will have to fix our finances, too.  Europe's experience is a warning that austerity -- a program of sharp budget cuts and (even) higher tax rates, but largely putting off “structural reforms” for a sunnier day -- is a dangerous path.

Why is austerity causing such economic difficulty? What else should we do?

The Real Trouble With the Birth-Control Mandate

(This is a Wall Street Journal Op-Ed. If you don't subscribe, there is a pdf on my webpage.)

When the administration affirmed last month that church-affiliated employers must buy health insurance that covers birth control, the outcry was instant. Critics complained that certain institutions should be exempt as a matter of religious freedom. Although the ruling was meant to be final, presidential advisers said this week that the administration might look for a compromise.

Critics are missing the larger point. Why should the Department of Health and Human Services (HHS) decree that any of us must pay for "insurance" that covers contraceptives?

The Fed's Mission Impossible

A Wall Street Journal Op-Ed  reviewing the latest  Fed's proposal (press release) to regulate big banks -- and, soon, everyone else. Here's the much more fun introduction, which we had to cut for space,

Imagine that your brother-in-law and his 5 buddies are heading for Las Vegas. Again. You already cosigned the refi on his house, and it was only a last-minute wire to the bail bondsman that got him out of the slammer last time.

So, you’re going to have another little kitchen-table talk about “the rules.” This time, no lending to your buddies (“limits on credit exposure”). No buying rounds of drinks (“limit dividend payouts and bonuses”). And for God’s sake, don’t lose it all on one silly bet (“stress test”). Keep some cash for the flight home (“liquidity provisions.”) No pawning the wife’s engagement ring for one last double-or-nothing (“leverage limits”). And if I hear there’s trouble, I’m going to come out myself and make sure you don’t overdo it. (“Early remediation”)

Sure, he says, with a twinkle in his eye. Because you both know he’s got your credit card, and you’re not going to let your sister live in poverty (“systemically important”). And you can’t talk about her dumping this lug (“breaking up the big banks”), or at least stopping these Vegas trips (“Volker Rule”), not unless you want to sleep on the couch for a month (“Dodd Frank”).

On to the real oped:

The Fed's Mission Impossible

The Federal Reserve last week announced its new "Enhanced Prudential Standards and Early Remediation Requirements" for big banks, as required by the Dodd-Frank law. You have to pity the poor Fed because it faces an impossible task.

The Fed's proposal opens with an eloquent ode to the evils of too-big-to-fail and moral hazard. And then it spends 168 pages describing exactly how it's going to stop any large financial institution from ever failing again.