Economic Daily Outlook




‘Sterilized’ Bond Buying an Option in Fed Arsenal

Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead.

Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

EDITORIAL: How Good Is the Housing News?

The housing market has shown signs of life recently. Home sales have beat expectations and pending sales neared a two-year high. But prices — the crucial measure of housing-market health — are still falling, driven down by increasing levels of distressed sales of foreclosed properties. That means the market, and the broader economy, which derives much of its strength from housing, are not out of the woods — not by a long shot.

For too long, President Obama and his team have relied on the banks to voluntarily modify troubled loans. Those efforts were focused on reducing monthly payments, not principal — a more powerful form of relief.

CEOs release policy wish list after meeting with Obama

A group of chief executives released its annual recommendations Wednesday for whipping the economy into shape, singling out fiscal and tax reforms as crucial to accelerating growth.

The wish list from the Business Roundtable calls for a balanced federal budget within five years, increased trade, a lowered corporate tax rate and a streamlined regulatory process focused on weeding out rules harmful to business.



U.S. Regulators ‘Paralyzed’ by Cost-Benefit Suits, Chilton Says

Wall Street banks are using the threat of lawsuits to prevent regulators from writing rules mandated by the Dodd-Frank Act, said Bart Chilton, a Democrat on the U.S. Commodity Futures Trading Commission.

“Some regulators live in constant fear and are virtually paralyzed by the threat” that they will face “spuriously” filed suits alleging that the costs and benefits of their rules weren’t adequately considered, Chilton said in a speech prepared for the Trade Tech 2012 conference today in New York. “It is a bastardization of the conduct and use of cost-benefit analyses in regulatory rulemaking.”



IPAB repeal moves forward

The House will move ahead Thursday in its push to repeal the Independent Payment Advisory Board, a controversial cost-cutting panel established under the healthcare reform law. The Ways and Means Committee is marking up Rep. Phil Roe’s (R-Tenn.) IPAB repeal bill, which easily cleared the Energy and Commerce Committee earlier this week.

The White House has aggressively defended the IPAB, which it pushed into the healthcare bill despite opposition from many House Democrats. Roe’s bill has bipartisan support and enough co-sponsors to easily pass the House once it comes to the floor.

The Ways and Means markup gets started at 9 a.m.

OPINION: Recent Study: Get the Facts (Dr. Farzad Mostashari)

Apparently, doctors who order a lot of imaging tests are more likely to have electronic systems that let them view those images in their offices.

That is the finding of an article appearing in the March 2012 issue of Health Affairs by McCormick and colleagues. This is not a particularly surprising observation. What is surprising is that the authors go far beyond the scope of their research to conclude that “the federal government’s ongoing, multibillion-dollar effort to promote the adoption of health information technology may not yield anticipated cost savings from reductions in duplicative diagnostic testing. Indeed, it is possible that computerization will drive costs in this area up, not down.”



Senate to vote on Keystone XL oil pipeline amendment

Under a deal to move forward with transportation legislation, the Senate will vote Thursday on measures to approve the Keystone XL oil pipeline and delay a major Environmental Protection Agency air regulation.

Senate Majority Leader Harry Reid (D-Nev.) announced the agreement Wednesday night in a floor speech. The agreement comes just days after the bill, which authorizes transportation spending for two years, failed to clear a key procedural hurdle in the Senate.



Teachers, Unhappy in Their Work (Motoko Rich)

Over the course of the Great Recession and its aftermath, school district budgets have been ravaged while 270,000 teachers and other public school employees have lost their jobs.

The teachers who have not been laid off have also been deeply affected by the economic downturn: class sizes are larger, after-school and arts enrichment programs have been cut, and an increasing number of their students are relying on safety net sources for health services and other basic needs.



Intractable Afghan Graft Hampering U.S. Strategy

For the past few months, possibly the most intriguing poker game in Kabul has been taking place in the sprawling pink sitting room of the man at the center of one of the most public corruption scandals in the world, the near collapse of Kabul Bank.

The players include people tied to President Hamid Karzai’s inner circle, many of whom have profited from the crony capitalism that has come to define Afghanistan’s economic order, and nearly brought down Kabul Bank. The game’s stakes “aren’t too big — a few thousand dollars up or down,” one of the participants said.

Betting thousands of dollars a night in a country where most families live off a few hundred dollars a year would seem like a bad play for Sherkhan Farnood, the founder and former chairman of Kabul Bank, the country’s biggest. His assets are supposed to be frozen, and he is still facing the threat of prosecution over a scandal that could end up costing the Afghan government — and, by extension, the Western countries that pay most of its expenses — almost $900 million, a sum that nearly equals the government’s total annual revenues.


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