Fiscal stimulus package up for judgment

In the wake of highest GDP contraction in seven years, several economic experts offered their take on the recent crisis and weighed in on the costs and benefits of a fiscal stimulus package during a Joint Economic Committee hearing in the Dirksen Senate Office Building.

“This is likely to be the most severe recession the United States has experienced in a number of decades,” said Nouriel Roubini, professor of economics at New York University’s Stern School of Business.

“This is going to be much longer, more severe, more protracted than the average U.S. recession.”

Roubini recommended an aggressive fiscal stimulus package priced anywhere between $300 billion and $400 billion, and warned that it should be passed soon.

“We cannot wait until the next congress in February because three months from now, the collapse of spending, consumption, and investments is going to be so sharp that the economic contractions could become even more severe.”

Roubini said that the next package should focus on direct government spending for goods and services since the private sector has decreased its overall consumption.

Richard Vedder, Professor of Economics at Ohio University and visiting scholar at the American Enterprise Institute, said he was “dubious” of a fiscal stimulus package. Vedder said that fiscal stimulus does little to aid the economy, and pointed out the last stimulus package was followed by a decrease in GDP and a rise in unemployment rates. However, if fiscal stimulus is unavoidable, Vedder stated that it should take a different form. “If you’re going to have a stimulus package, certainly a tax cut is preferable to a spending increase...a tax cut would have some more positive long run incentive effects.”

When asked if the Troubled Asset Relief Program, or the bailout bill, was a good idea, Roubini answered it was the right step as long as it was used to inject banks with public capitol. This was a notion agreed upon by Simon Johnson, Ronald Kurtz Professor
of Entrepreneurship at MIT.

“The original design of TARP to buy distressed assets was a bad idea and remains a bad idea. Using those funds to recapitalize the bank system and the insurance industry, and other financial institutions that may need recapitalization as we head into serious recession is a very good, if not essential idea,” said Johnson.

Vedder said that he reluctantly supported the original proposal, but was neutral regarding the revisions.

HOPENOW offers..hope

The HOPENOW Alliance sponsored a conference call discussing the ways they have helped “distressed homeowners” keep their houses and start to bring about the end of the foreclosure crisis.

The call described the new agreement HOPENOW has implemented to help distressed families. This agreement will hopefully “streamline help”- making monetary assistance come faster to families in need. The new agreement will also hopefully alert more at risk homeowners before they find themselves in financial trouble.

Leaders of the Alliance emphasized the progress their program has had, and the steps they are making to improve their efforts. They said they are still trying to make borrowers more open to discussing financing options with the people loaning them money.

What exactly is “illegal” when it comes to online gambling?

The House Committee on Financial Services Subcommittee on Domestic and International Monetary Policy, Trade, and Technology held a hearing entitled, “Proposed UIGEA Regulations: Burden without Benefit?” focused on debating the legislation prohibiting illegal online gambling.

The Committee was divided over their views concerning online gambling laws. Many members of Congress said that prohibiting online gambling was necessary because of the effects gambling abuse has on both individual and family life. Supporters of the movement to revoke the online gambling laws argued that the restrictions are an intrusion upon American privacy rights. These members of Congress mentioned how enforcing the law has become a burden for banks being unfairly pushed to enforce gambling legislation upon people depositing checks “illegally” obtained from gaming websites.

A significant portion of the debate was devoted to clarifying how exactly to identify different types of gambling as being either legal or illegal. Being that poker in particularly is both a game of skill and chance, the lines to define such law are difficult to draw.

Ben Bernanke, Chairman of the Board of Governors of the United States Federal Reserve, Testifies Before House Financial Services Committee About State of the Economy and U.S. Monetary Policy

Federal Reserve Chairman Ben Bernanke testified before members of Congress this afternoon at a House Financial Services Committee hearing regarding monetary policy and the state of the American economy.

The Committee questioned Bernanke about a wide variety of factors that account for the financial successes and failures of our nation. As one of the most important decision makers in US economic policy, Bernanke was most critically interrogated about the fast increasing rate of housing foreclosures facing homeowners unable to pay back “risky” loans they are unable to afford.

In response to such criticisms, Bernanke discussed the need for American consumers to better understand where the money they spend goes. Regarding housing foreclosures and credit debt problems, Bernanke explained the need for American’s purchasing goods and real estate to understand the interest rates they are committing themselves to, as well as the additional fees many purchases are accompanied by.

Also emphasized by Bernanke was his hope that the economic stimulus package recently signed by President Bush would remain temporary. Bernanke discussed his desire to construct a thriving economy, yet at the same time cautioned that the only way for such success to become permanent would be for the American people to learn how to successfully maintain one.