Wednesday, October 29, 2008
Saturday, October 4, 2008
- The S&L Crisis
It cost $124 billion, but an FDIC historian notes, “Perhaps a measure of the Resolution Trust Corporation’s success is that little more than a decade after it closed, this agency that provoked so much debate is now largely forgotten.”
- Mortgage defaults of the Great Depression
By 1933, a thousand Americans a day were losing their homes to the bank. Creation of the Home Owners’ Loan Corporation handled 1.9 million applicants, about half of whom had monthly incomes below $150.
One in ten Americans eventually secured aid from the agency, and since there was no secondary market for securitized mortgages, the agency had to hold the loans for the full terms.
When it closed in 1951, 80% of borrowers had paid off their loans on time or early, and it even earned a small profit.
Economist Alan Blinder has cited it as a model to be considered today.
- The Panic of 1792
When the federal government assumed obligations that states owed from the Revolutionary War, it added $18 million to a domestic debt of $65 million, held in debt securities attractive to speculators.
One speculator in particular cornered the market on government 6% bonds, so-called Sixes, and then prompted a selling frenzy that led to a 25% drop in value.
Working without a historical blueprint, Alexander Hamilton engineered an innovate response. The Treasury borrowed money from banks and used to buy the bonds, lifting the market price. He also told banks to accept the bonds as collateral for loans, with the government guaranteeing their worth.
The financial system stabilized quickly, and not a single bank faired for fifteen years, a remarkable outcome for such an unproven strategy, says economic historian Robert Wright. He named his son Alexander Hamilton Was Wright.
People without it, and preferably those least able to afford it. That's what makes San Francisco's recent moves on health care all the more perplexing.
When the city fought in court to charge businesses for employee health care coverage, it turned the whole program upside-down, placing the burden on those at the bottom of the economic ladder.
They'll be hit hard by the foolish flat-rate payment to the city. The nearly $2/hr charge is minor only for those with large salaries. For the poorest employees, it's a significant portion, more than 20% of San Francisco's substantial ($9.36/hr) minimum wage.
Guess what happens to the price of milk at the corner store.
And to the cost of your dry cleaning, and your meals out, and everything else you buy. Those price increases may not matter much to the wealthiest, who already have health care, but they will to the very people who need the new coverage.
Yes, businesses with fewer than 20 employees are exempt, but that hardly helps. They often need health care options anyway - I do, at my own business - and companies just over the limit face a terrible set of choices. Any company with 30 employees that sees its labor costs leap has got to consider layoffs, and that's the worst kind of coverage of all.
Far better is the Massachusetts plan: spread the cost through all participants, subsidize for the poorest, and make sure the burden doesn't break the very people you're trying to help.