Many TALF Investors Wealthy and Unknown –

Fed’s Delay on Release of Transcripts Will Be Reviewed by Issa – The prospective head of the U.S. House Oversight Committee said he will consider whether the five-year lag time for the release of transcripts of Federal Reserve meetings should be shortened.  “If the Fed’s full transcripts can be released sooner, they should be,” said Representative Darrell Issa, a California Republican who’s set to chair the panel in January, in an interview. “If they’re going to have some definable negative effect on their deliberations or ability to do their job and on markets, then we have to be cautious.”  Issa’s proposal comes amid rising criticism of the central bank by Republicans, who won control of the House in November elections. John Boehner, the presumptive House speaker, and three other Republican leaders have criticized the Fed’s plan, announced a day after the election, to buy $600 billion of assets to boost the economy, saying it risked weakening the dollar and fueling asset bubbles.

ECB steps up push to calm markets The European Central Bank launched its most aggressive intervention in government bond markets for seven months after Jean-Claude Trichet, president, unveiled a determined – but carefully calibrated – response to the eurozone crisis. Traders said the ECB was on Thursday buying Portuguese and Irish bonds in €100m tranches – four times bigger than previously. The moves sharply brought down the cost of borrowing for Lisbon and Dublin and sparked a euro rally. Addressing a press conference in Frankfurt, Mr Trichet stopped short of an explicit announcement that the euro’s monetary guardian was escalating its actions to restore investor confidence in the eurozone. Instead, he stressed the responsibility of eurozone governments to win back confidence in their public finances – indicating that they should be prepared if necessary to increase the size of the European Union’s rescue funds.  But the ECB president acknowledged market tensions were “acute” and confirmed there would be no limit to the size of the bond-buying programme. Hinting at a strategy that would rely more on the element of surprise, Mr Trichet said that the ECB’s intervention in bond markets would be “commensurate” with the malfunctioning of markets.

Is the IRS Racist? – If you are a minority, you might want to take extra care filling out your taxes this April. Apparently, the Internal Revenue Service is gunning for you. According to a study released on Thursday, African-Americans and Hispanics are twice as likely to get hit by an enforcement action from the IRS than the average US citizen. What’s worse, according to the study, is that in at least some of the instances minorities are being unfairly targeted: Some minorities hit with IRS enforcement actions don’t owe any taxes and indeed might be entitled to a refund.  Nevertheless, the IRS still garnishes their wages, imposes tax liens, and levies their bank accounts which often costs them their jobs, ruins their credit ratings, and forces them into the underground cash economy. The study comes from TaxLifeboat, a website that works with people who have run afoul of the IRS.
Scoring Tax Reform: Budget Baselines Don’t Really Matter – My TPC colleague Howard Gleckman wrote the other day about the confusion caused by the multiple baselines advocates use to measure the effects of tax proposals. But baselines don’t really matter. What’s important is not where we start or how things change but where we end up.  Baselines are largely political. Partisans use whichever version strengthens their ability to bludgeon opponents in an essentially Inside-the-Beltway game. Voters, thoroughly confused by this arcane and complex scorekeeping, can’t figure out who’s telling the truth.  Because a baseline does give you a starting place from which to calculate change, it helps measure the effects of tax proposals. You can see that a new tax raises revenues compared to some prior year, or that it raises taxes for high-earners relative to what they paid at some time in the past. But those are often the wrong questions.  The trouble is that these starting points are entirely arbitrary. There is nothing inherently “right” or “wrong” about the tax law as it was in 2000, or in 2003, or this year. Nothing makes any of them more or less worthy as a basis for measurement.

2010 sets new temperature records – Temperatures reached record levels in several regions during 2010, the World Meteorological Organization (WMO) says, confirming the year is likely to be among the warmest three on record. Parts of Russia, Greenland, Canada, China, North Africa and South Asia all saw the mercury soar to record levels. The three main temperature records show 2010 as the warmest, or joint warmest, year in the instrumental record. The UK Met Office suggests 2011 will be cooler, as La Nina conditions dominate. This brings colder than average water to the top of the eastern Pacific Ocean, which lowers temperatures globally. The two leading US analyses of global temperature show that up until the end of October, 2010 was the warmest year in the instrumental record going back to 1850.

NASA Finds New Life Form – At its conference today, NASA scientist Felisa Wolfe-Simon will announce that NASA has found a bacteria whose DNA is completely alien to what we know today. Instead of using phosphorus, the bacteria uses arsenic. All life on Earth is made of six components: carbon, hydrogen, nitrogen, oxygen, phosphorus and sulfur. Every being, from the smallest amoeba to the largest whale, shares the same life stream. Our DNA blocks are all the same. But not this one. This one is completely different. Discovered in poisonous Mono Lake, California, this bacteria is made of arsenic, something that was thought to be completely impossible. While Wolfe-Simon and other scientists theorized that this could be possible, this is the first discovery. The implications of this discovery are enormous to our understanding of life itself and the possibility of finding beings in other planets that don’t have to be like planet Earth.

A plan to bury Social Security, not to strengthen it – Under the plan released December 1, 2010 by the co-chairs of President Obama’s National Commission on Fiscal Responsibility and Reform, most workers, including most low earners and workers approaching retirement, would see significant cuts in Social Security benefits. Even current retirees would see cuts due to a proposed reduction in the annual cost-of-living adjustment. According to an analysis of the plan by Social Security’s chief actuary (Goss 2010a), middle-class workers with average earnings over the course of their careers (around $43,084 in 2010) would see a 22% cut in benefits by the end of the 75-year projection period, not significantly different from the 23.5% cut in benefits these workers would face in 2085 if nothing were done to shore up Social Security’s finances. Because these cuts would fall on top of earlier cuts implemented in 1983, including a gradual increase in the normal retirement age from 65 to 67, the share of a middle-class worker’s pre-retirement earnings replaced by Social Security would fall from 49% in 1980 to 28% in 2080 if the worker retired at 65 (see Figure A).  If anything, this understates the problem, since most workers retire before age 65. Read Issue Brief 191
Will Today’s Unemployed Become Tomorrow’s Unemployable? – Lots of smart economists and policy makers have been debating whether the problems in the job market are primarily cyclical (that is, temporary, and related to slack demand) or primarily structural (that is, reflecting a deeper problem in the economy, such as a tougher mismatch between the skills employers want and the skills workers have). But this discussion largely misses an important point: Cyclical unemployment can become structural unemployment because perfectly good workers become less employable the longer they are out of work. Economists have long known this to be the case, and have documented that the likelihood of finding a job falls drastically the longer a person has been unemployed. The following chart, from a 2008 paper by the University of Chicago’s Robert Shimer, shows the percentage of each group of workers with various durations of unemployment who found work in the coming month:  The horizontal axis shows how long someone has been unemployed, and the vertical axis shows the likelihood that the person will find a job in the next month. Professor Shimer found that 51 percent of workers who had been unemployed for one week obtained work in the following month, but the share declined sharply after that.

 Many TALF Investors Wealthy and Unknown – One investor, Kenneth H. Dahlberg, is a World War II flying ace who, as a volunteer in President Richard M. Nixon’s re-election campaign, was a minor figure in the Watergate scandal.  Another investor, Magalen O. Bryant, runs a horse farm in Virginia and is active in steeplechase racing circles. A third, Ward W. Woods, is the chairman of the nonprofit organization that runs the Bronx Zoo.  They were among scores of wealthy but lesser-known investors in an emergency lending program the Federal Reserve announced in November 2008, three weeks after President Obama’s election, to support the market for student, auto, credit card and small-business loans.  The investors, whose identities were disclosed as part of a trove of 21,000 records released on Wednesday at the direction of Congress, are a cross-section of America’s wealthy — investors who, in the midst of the worst financial crisis since the Great Depression, heard about an opportunity and weighed the risk.  The list, not surprisingly, includes famous Wall Street financiers like J. Christopher Flowers, John A. Paulson and Julian Robertson, demonstrating the extent to which the Fed relied on fast-moving hedge funds to keep credit flowing through the markets.  There were also institutional investors like the Ford Foundation and the pension plan for Major League Baseball. And there were wealthy businessmen like the computer executive Michael S. Dell and the home builder Bruce E. Toll.

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