Challenges of the Volcker Rule:
My Analysis

Posted on October 14, 2011 by Bob Pozen

Some people argue that the repeal of Glass-Steagall in 1999 was a major cause of the 2008 financial crisis by allowing banks to engage in riskier activities. But this argument seems questionable. While banks took on new risks in the 2000s, most were in the form of investments in highly rated bonds that went sour. Such investments would have been allowed under Glass-Steagall.

In any event, Congress decided to move partially back toward Glass-Steagall by including in Dodd-Frank the Volcker rule—which bans proprietary trading by banks with exceptions for hedging and serving consumers Continue reading →

How big of a problem is policy uncertainty?

Posted on October 11, 2011 by Bob Pozen

There are two recent reports on the importance of policy uncertainty as a factor slowing down the economy. Unsurprisingly, they come to opposite conclusions. Continue reading →

Anxious about your retirement?
Here are eight ways to stay on track
[Washington Post]

Posted on October 9, 2011 by Bob Pozen

Anxiety about retirement is high — and rises with every shudder in the financial markets. Americans are increasingly worried that they won’t have enough money to carry them through their lifetime. They’re looking for advice on how to invest their savings to meet that goal. Most of them are investing in mutual funds. More than half the assets in retirement plans managed by individuals — think IRAs, 401(k)s and 403(b)s — are invested in mutual funds, according to the Investment Company Institute. Here are eight tips to help you manage your fund investments to keep your retirement savings on track.

Read the rest at the Washington Post

Who says naps are for Kindergarten?
How to take naps at work

Posted on October 7, 2011 by Bob Pozen

It’s getting to be that time of day, when your morning coffee has long worn off, a busy day feels like it won’t end, and your lunch is still heavy in your stomach. It’s getting to be that time of day: time for a nap, that is.

After a busy morning, a quick nap can help you feel refreshed and have a productive afternoon. Personally, I like to take a 30 minute nap right after lunch. Without it, I can definitely feel my eyelids get heavy when two or three o’clock rolls around. More professionals should join me and take a quick nap in the office as a routine.

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A triangle of government bailouts

Posted on October 6, 2011 by Bob Pozen

Here’s a good example of unintended consequences of government policy. Much of the program did not increase lending to small business; just one part of the government paying back the debts owed to another.

More than half of $4 billion in federal funds disbursed this year to spur small-business lending by community banks was used to repay bailout funds that the banks received under the government’s Troubled Asset Relief Program.

The Small Business Lending Fund was meant to raise capital at smaller banks, which tend to lend more heavily to small businesses, in the hopes of jump-starting growth and employment. But instead of directly lending to small businesses, many of the banks used the money to rid themselves of higher-cost TARP debt and tougher restrictions.

Relaxing accounting standards for small businesses

Posted on October 5, 2011 by Bob Pozen

From the New York Times, on possible new, relaxed accounting standards for smaller companies:

The parent organization of the Financial Accounting Standards Board will propose on Tuesday that a new body be set up to modify accounting rules for private companies, some of which have complained that existing rules are too complicated and costly.
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A simpler tax code: It already exists!

Posted on October 3, 2011 by Bob Pozen

There have been calls from both parties to reform the individual tax code to increase economic efficiency and reduce the cost of preparing taxes—which has been estimated as hudreds of billions of dollars.

Most reformers generally find that a flatter tax code accomplishes both goals. It reduces the economic inefficiencies of high marginal rates, and distortive deductions and credits (which are merely spending by another name); they also make filing a tax return much easier. But few realize that a version of this tax code already exists: it’s called the Alternative Minimum Tax.
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