Shutdown: Complacency on Wall Street Could Be Worse Than a Panic

From the New York Times “DealBook” Blog by Jason Eissenger:

Don’t look to a market panic to save us.

We are in upside-down world, where a freak-out now would help stave off financial devastation later. By staying cool, the markets are making a crisis more likely.

Sure, the stock market has ebbed lower, but it hasn’t plunged. Short-term bond markets have hiccupped. Spreads on United States credit default swaps have widened, indicating a slighter greater fear of default, but nothing drastic. The financial media keep grasping at any movement to demonstrate investors are worried. But market participants simply don’t think that the government will end up doing something so obviously reckless and harmful as refusing to pay its debts.

Wall Street’s lack of worry reflects cynicism about Washington (who doesn’t feel that?) but also a deep misreading of how significant the ideological fissures are in the capital. Wall Street is misunderstanding the extremism of the House Tea Party Republicans who precipitated the government shutdown and debt ceiling crisis.

READ THE COMPLETE ARTICLE HERE.

With Summers out, Yellen is now favored to lead the Federal Reserve

In the last month, a groundswell of opposition from economists and the public alike has led to positive development. After a major announcement last week by 3 key Democratic Senators who said they would oppose the nomination of Larry Summers, it looks like Janet Yellen, currently the second in command at the Fed, is now favored to be President Obama’s pick to lead the Federal Reserve.

Watch this video on the nomination of Janet Yellen, the first woman nominated to the Chair of the Fed.

Update: 300 economists sign letter supporting nomination of Yellen as Fed Chair

From today’s LA Times:

More than 300 economists have signed anopen letter to President Obama urging him to nominate Janet L. Yellen to be the next head of the Federal Reserve, citing her “consistently good judgment” and her commitment to reducing unemployment.

“In our opinion, she is the best possible leader for the Federal Reserve Board at this critical time in our nation’s history,” the letter said.

“Her knowledge of how the Fed sets policy, her understanding of the relationship between monetary policy and economic growth, and her ability to see and propose solutions to emerging economic problems is second to none,” it said.

Among those signing the letter are Nobel Prize winner Joseph Stiglitz, former Fed governors Alan Blinder and Alice Rivlin and two prominent former Yellen colleagues at UC Berkeley, Christina Romer and Laura D’Andrea Tyson.

Read the entire article here.

Nobel laureate criticizes Summers for deregulation leading to recession

Nobel laureate economist Joseph Stiglitz makes a case for Janet Yellen to head the Federal Reserve, and criticizes Larry Summers, who is President Obama’s alleged first choice, for his support of economic deregulation of the financial sector, which precipitated the 2008 recession.

Read the full article in Stiglitz’s weekly NYT blog, “The Great Divide.”