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Catherine Rampell’s column on Uber is well worth reading. The basic point is very simple and should be obvious. There are good reasons for regulating cabs. They should have proper insurance, meet safety standards (both car and driver), and should also be limited in number. (Cabs create congestion and pollute.)
Whatever regulations are established should apply across the board. Uber doesn’t get an exemption because it is run by incredibly rich twenty somethings.
Catherine Rampell’s column on Uber is well worth reading. The basic point is very simple and should be obvious. There are good reasons for regulating cabs. They should have proper insurance, meet safety standards (both car and driver), and should also be limited in number. (Cabs create congestion and pollute.)
Whatever regulations are established should apply across the board. Uber doesn’t get an exemption because it is run by incredibly rich twenty somethings.
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The housing bubble was apparently too far in the past for many of the people writing about housing to remember. Part of the problem was that many borrowers got loans that they were ill-situated to repay.
One of the factors that is a strong determinant of whether people will be able to pay a mortgage is the size of the down payment. The equity from a down payment serves as a cushion in bad times. It also reduces the risk to lenders, since this is money they stand to recover in the event of a default.
The NYT misled readers about the relative risk from low down payment loans in an article on the decision by the government to allow Fannie Mae and Freddie Mac to purchase loans with just 3 percent down payments. The piece cited several commentators saying that the risk of defaults would not increase substantially by lowering down payment requirements.
A study by the Center for Responsible Lending found that the default rate for loans with down payments of between 3 to 10 percent was 6.8 percent. This is 45 percent higher than the default rate it found for mortgages with down payments of 10 percent or more. The gap would be even larger of the comparison was restricted to those with down payments between 3 to 5 percent, with mortgages with down payments of 20 percent or more.
It is dubious housing policy to encourage moderate income people to take out mortgages on which they are likely to default. Furthermore, since the median period of homeownership among low income homebuyers is less than five years, a relatively small portion of households who are able to buy homes through this policy will accumulate any substantial amount of wealth. By contrast, the policy is likely to help the banking and real estate industries accumulate wealth.
Addendum:
In response to the questions in the comments, the study did not directly give the 57 percent figure, you had to back it out from the numbers they did give. According to their data, the additional low down payment mortgages raised the overall average from 4.7 percent to 5.2 percent. In order for this to be the case, the default rate on the additional mortgages had to be 6.8 percent — in other words, 45 percent higher than the higher down payment mortgages.
In fact, assuming their analysis is like every other analysis of default rates, it found a strong inverse relationship between the size of the down payment and the default risk. The likelihood of defaults for those putting down 3-5 percent is probably close to four times as high as those putting down 20 percent. I think it’s great to help low and moderate income people get good housing. But this policy is about helping banks get their bad mortgages insured by taxpayers.
One more point, it is a lie to say that this is an issue about people being able to get a mortgage with a low down payment. This is an issue about people being able to get a government guaranteed mortgage with a low down payment. We are talking about people paying a higher interest rate that reflects the actual risk associated with their mortgage.
Correction: An earlier version had put the difference at almost 80 percent due to an arithmetic error. Thanks to Bill Sermons, at the Center for Responsible Lending for calling the error to my attention.
The housing bubble was apparently too far in the past for many of the people writing about housing to remember. Part of the problem was that many borrowers got loans that they were ill-situated to repay.
One of the factors that is a strong determinant of whether people will be able to pay a mortgage is the size of the down payment. The equity from a down payment serves as a cushion in bad times. It also reduces the risk to lenders, since this is money they stand to recover in the event of a default.
The NYT misled readers about the relative risk from low down payment loans in an article on the decision by the government to allow Fannie Mae and Freddie Mac to purchase loans with just 3 percent down payments. The piece cited several commentators saying that the risk of defaults would not increase substantially by lowering down payment requirements.
A study by the Center for Responsible Lending found that the default rate for loans with down payments of between 3 to 10 percent was 6.8 percent. This is 45 percent higher than the default rate it found for mortgages with down payments of 10 percent or more. The gap would be even larger of the comparison was restricted to those with down payments between 3 to 5 percent, with mortgages with down payments of 20 percent or more.
It is dubious housing policy to encourage moderate income people to take out mortgages on which they are likely to default. Furthermore, since the median period of homeownership among low income homebuyers is less than five years, a relatively small portion of households who are able to buy homes through this policy will accumulate any substantial amount of wealth. By contrast, the policy is likely to help the banking and real estate industries accumulate wealth.
Addendum:
In response to the questions in the comments, the study did not directly give the 57 percent figure, you had to back it out from the numbers they did give. According to their data, the additional low down payment mortgages raised the overall average from 4.7 percent to 5.2 percent. In order for this to be the case, the default rate on the additional mortgages had to be 6.8 percent — in other words, 45 percent higher than the higher down payment mortgages.
In fact, assuming their analysis is like every other analysis of default rates, it found a strong inverse relationship between the size of the down payment and the default risk. The likelihood of defaults for those putting down 3-5 percent is probably close to four times as high as those putting down 20 percent. I think it’s great to help low and moderate income people get good housing. But this policy is about helping banks get their bad mortgages insured by taxpayers.
One more point, it is a lie to say that this is an issue about people being able to get a mortgage with a low down payment. This is an issue about people being able to get a government guaranteed mortgage with a low down payment. We are talking about people paying a higher interest rate that reflects the actual risk associated with their mortgage.
Correction: An earlier version had put the difference at almost 80 percent due to an arithmetic error. Thanks to Bill Sermons, at the Center for Responsible Lending for calling the error to my attention.
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In prior decades trade deals were largely about reducing tariffs and quotas that obstructed trade between countries. Due to the impact of these past deals, these barriers are now quite low or non-existent.
That is why the trade deals currently being negotiated by the Obama administration, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP), are not really about reducing trade barriers. These deals are about locking in place a corporate friendly structure of regulation. This structure will limit the ability of elected governments to impose regulations on the environment, health and safety, and other areas.
Some of these regulations increase barriers to trade, such as increased patent and copyright protection. The Washington Post once again enthusiastically endorsed the TPP and TTIP in its lead editorial today. Since it is entirely possible that the increased protectionism in these trade deals will have a larger economic impact than any reduction in trade barriers, we should recognize that the Post may be an ardent supporter of protectionism for U.S. industries who find they can’t make enough profit in a free market.
The paper also deserves some ridicule for touting the possibility that the Fed will raise interest rates:
“Indeed, if favorable trends such as low oil prices continue, the economy might achieve the long-awaited “escape velocity” that would enable the Federal Reserve to end its zero interest-rate policy without harming growth.”
In fact, it will take about two and a half years of the job growth that we saw in November to restore the demographically adjusted employment to population ratio that we had before the recession. It is also striking how the Post seems to see it as an end in itself that the Fed raise interest rates. Low unemployment and income growth are standard economic goals, a federal funds rate is not typically viewed as a goal of economic policy.
In prior decades trade deals were largely about reducing tariffs and quotas that obstructed trade between countries. Due to the impact of these past deals, these barriers are now quite low or non-existent.
That is why the trade deals currently being negotiated by the Obama administration, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP), are not really about reducing trade barriers. These deals are about locking in place a corporate friendly structure of regulation. This structure will limit the ability of elected governments to impose regulations on the environment, health and safety, and other areas.
Some of these regulations increase barriers to trade, such as increased patent and copyright protection. The Washington Post once again enthusiastically endorsed the TPP and TTIP in its lead editorial today. Since it is entirely possible that the increased protectionism in these trade deals will have a larger economic impact than any reduction in trade barriers, we should recognize that the Post may be an ardent supporter of protectionism for U.S. industries who find they can’t make enough profit in a free market.
The paper also deserves some ridicule for touting the possibility that the Fed will raise interest rates:
“Indeed, if favorable trends such as low oil prices continue, the economy might achieve the long-awaited “escape velocity” that would enable the Federal Reserve to end its zero interest-rate policy without harming growth.”
In fact, it will take about two and a half years of the job growth that we saw in November to restore the demographically adjusted employment to population ratio that we had before the recession. It is also striking how the Post seems to see it as an end in itself that the Fed raise interest rates. Low unemployment and income growth are standard economic goals, a federal funds rate is not typically viewed as a goal of economic policy.
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The NYT had an article which discussed the potential political implications of a better than expected economic picture. At one point the article comments:
“The White House’s push for fast-track trade negotiating powers — and eventually for a major Trans-Pacific Partnership trade pact — could be eased by growing confidence in the economy and the nation’s ability to compete internationally.”
This comment is essentially a non sequitur. The major pacts up for negotiation, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP) will have almost no impact on traditional trade barriers in the form of tariffs or quotas. They are about imposing a regulatory structure on federal, state, and local governments that will be more business friendly.
For example, the deals are likely to limit the sorts of environmental and health and safety restrictions that can be put in place. They will also likely limit the ability of governments to put in place privacy restrictions on the use of personal data. And they will increase patent and copyright protections, likely putting in place rules similar to those that Congress tried to impose through the Stop Online Piracy Act (SOPA). There is almost nothing about the likely provisions of the TPP and TTIP that would become more acceptable to the public due to a stronger economy.
This article also includes the bizarre comment:
“The Republican Congress will again want to pursue a balanced budget while also cutting taxes.”
If the republicans want to balance the budget and cut taxes, then they want to cut spending. It would have been simpler and more informative to just say Republicans want to cut spending to offset the revenue lost through tax cuts and lower the deficit.
It is also important to note that economy is not really doing much better than expected. Through the first three quarters of 2014 the economy has grown at a 2.1 percent annual rate. At the start of the year, the Congressional Budget Office projected the economy would grow by 3.1 percent in 2014. Employment has grown more rapidly than projected and unemployment has fallen by more than projected. This is due to lower than expected productivity growth and people dropping out of the labor force.
Tax collections have been higher than expected largely as a result of the run-up in the stock market and the resulting capital gains. Part of the story of the strong stock market has been the redistribution from wages to profits. Unless the we see several more years of strong job growth like the 321,000 job gains in November, workers are not likely to see substantial wage gains. Untill workers start seeing wage growth, and thereby share in the benefits of economic growth, most people will not view the economy as strong.
The NYT had an article which discussed the potential political implications of a better than expected economic picture. At one point the article comments:
“The White House’s push for fast-track trade negotiating powers — and eventually for a major Trans-Pacific Partnership trade pact — could be eased by growing confidence in the economy and the nation’s ability to compete internationally.”
This comment is essentially a non sequitur. The major pacts up for negotiation, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP) will have almost no impact on traditional trade barriers in the form of tariffs or quotas. They are about imposing a regulatory structure on federal, state, and local governments that will be more business friendly.
For example, the deals are likely to limit the sorts of environmental and health and safety restrictions that can be put in place. They will also likely limit the ability of governments to put in place privacy restrictions on the use of personal data. And they will increase patent and copyright protections, likely putting in place rules similar to those that Congress tried to impose through the Stop Online Piracy Act (SOPA). There is almost nothing about the likely provisions of the TPP and TTIP that would become more acceptable to the public due to a stronger economy.
This article also includes the bizarre comment:
“The Republican Congress will again want to pursue a balanced budget while also cutting taxes.”
If the republicans want to balance the budget and cut taxes, then they want to cut spending. It would have been simpler and more informative to just say Republicans want to cut spending to offset the revenue lost through tax cuts and lower the deficit.
It is also important to note that economy is not really doing much better than expected. Through the first three quarters of 2014 the economy has grown at a 2.1 percent annual rate. At the start of the year, the Congressional Budget Office projected the economy would grow by 3.1 percent in 2014. Employment has grown more rapidly than projected and unemployment has fallen by more than projected. This is due to lower than expected productivity growth and people dropping out of the labor force.
Tax collections have been higher than expected largely as a result of the run-up in the stock market and the resulting capital gains. Part of the story of the strong stock market has been the redistribution from wages to profits. Unless the we see several more years of strong job growth like the 321,000 job gains in November, workers are not likely to see substantial wage gains. Untill workers start seeing wage growth, and thereby share in the benefits of economic growth, most people will not view the economy as strong.
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