I wonder to what extent the Fed's focus on fighting inflation has contributed to the problem. To the extent that the Fed has either overtly or subtly encouraged policies to reduce the income tax burden on rich Americans (while increasing the reliance of the federal budget on Social Security taxes), I imagine this is to some extent because a policy of lowering the tax burden in favor of low- and middle-income families would leave more money in their pockets to spend on consumer goods, which might have the eventual effect of causing prices to rise. So the Fed figures that if more wealth is concentrated in the hands of the richest Americans that's okay because at least it means we won't have to worry about inflation.

However, this creates a problem: lots of wealthy people have more money than they know what to do with. Investment banks, "wealth management" firms and hedge funds are more than happy to help them deal with this crisis. But there aren't enough basic things for them to invest in. Instead, they start rolling out exotic financial instruments like collateralized debt obligations as a place for the wealthy to invest their surplus money. This was a great plan right up until it wasn't.

I'm still struck by the irony that on the one hand Wall Street rewards companies that hold the line on raising wages while on the other hand Wall Street was pouring money into subprime mortgages which depended, of course, on borrowers having enough income to keep up with their payments.

Posted at July 3, 2008 12:21 PM in response to Class Warfare and the New Gilded Age

I would be interested in seeing the mailers sent out by BMW Direct, and I wonder how inflammatory they are. In Massachusetts, the Democratic candidate they were running against was Barney Frank, and I can imagine mailers that described a check for Charles Morse (the Republican) as a chance to defeat the "homosexual agenda." In Georgia, Honeycutt is running in an Atlanta-area district represented by David Scott (who's actually a pretty business-friendly Democrat), but I wonder if the specter of former Rep. Cynthia McKinney is invoked in order to convince people to open up their wallets.

Posted at July 1, 2008 10:56 AM in response to Conservative Fundraising Firm Takes Hefty Cut From Other Candidate's Haul

"These left-wing, liberal, Al Franken bloggers are as goofy a bunch as I've ever seen," the campaign's spokesperson said. "They've spent the entire morning concocting a conspiracy theory, wasting valuable bandwidth on the Internet."

Think of the tubes, people! Stop wasting precious internets trying to determine the "facts."

Posted at June 20, 2008 4:27 PM in response to Did GOP Senator Fake An Ad Showing Him Cozy With Wife?

It's still unclear to me whether or not Conrad or Dodd knew that they were so-called "friends of Angelo." It seems conceivable that Mozilo unilaterally intervened to put them in this program without necessarily informing them of what he was doing. It could have been a way for Mozilo to boost his own sense of self-importance rather than an attempt at peddling influence. (I suspect that the Jim Johnson case is a rather different set of circumstances since he was a former Fannie Mae executive.)

In the long run, of course, Mozilo may have pointed out to the senators that they received favorable treatment from his company and requested some sort of quid for his quo. But it isn't clear that ever happened, either. If Dodd and Conrad got unfair benefits then paying back the difference between the rate they received and the market rate is probably the fair thing to do. But it doesn't seem fair to accuse them of corruption.

Posted at June 16, 2008 1:11 PM in response to Today's Must Read

Holding the press conference in Louisville means that Obama will likely get TV coverage that will stretch into southern Indiana, so this is particularly well-timed.

Also, I suspect that there are a lot of Blue Dog reps. who see Chandler as a role model, so this may bode well for additional endorsements.

Posted at April 29, 2008 1:01 PM in response to Kentucky Rep. Ben Chandler Endorsing Obama