Archive for February, 2009

Class News (335/402): Now it’s a depression

February 28, 2009

Class News (335/402): Errata/Further Study

February 27, 2009

I made three  misstatements last week that need correcting.  Nothing  substantive;  still, it is important to get things right.

  • At the F&S session, I said Bank of United States (BoUS) was the 8th largest U.S. bank at the time of failure.  I meant it was the 28th – still the largest to fail up to that time.
  • At the F&S  session, I said J.P. Morgan was involved in discussions about saving BoUS – which of course is impossible because he died in 1913.  I meant to say representatives of J.P. Morgan and Company (along with the New York Clearinghouse) were involved – as had been the case in 1907.
  • In 402 (pm), I was asked if preferred stock the federal government received for injecting capital into Citi last November were convertible to common stock.  I said “no” – technically true.  But the government also got warrants for common with strike of  $10.61.  Such a warrant is like a call option, conferring the right to buy the stock in question at a specific price, here $10.61.).  Background: Wikipedia – Warrants and  Citi Press Release (11/24/08).

Further Study
An article from Wednesday’s WSJ (A1) on problems running Citi day-to-day caused by government involvement: Citigroup Chafes Under U.S. Overseers.  From today’s online WSJ, story on just-announced plan to give more public funds to Citi: U.S. to Take Big Citi Stake and Overhaul the Board. In this plan, Citi is offering to convert non-convertible preferred to common.  If it goes through, the feds will control 36% of common equity (14.1 percentage points short of effective nationalization).  Finally, an op-ed from Tuesday’s WSJ (A13) by Bill Isaac, who presided over nationalization of Continental Illinois in 1984 as FDIC head: Bank Nationalization Isn’t the Answer.

By the way, 4th quarter 2008 GDP numbers  have been revised – talk about grim (down much more than 3.8%).  Here is WSJ story  (online, today): GDP Shrank 6.2% in 4th Quarter, Deeper Than First Thought.

Just for Fun
Now available on e-bay: Blank Checks from BoUS.

Posted at 11:55 am

Class News (335/402): Exam Info; Laugh Break-2

February 27, 2009

I will have the remaining candidate essay questions posted later today.  Sorry for  the  delay.

Laugh Break:
As you pore over F&S for the exam, remember it could be worse:


Also, moral hazard in action (from a recent Dilbert):

Posted at 9:54 am

Further Study (335/402): Laugh Break

February 26, 2009

In 2006, choice of replacement for Alan Greenspan came down to Glenn Hubbard (Dean of CBS – Columbia Business School) and Ben Bernanke.  When Hubbard lost out, CBS follies made a parody music video — based on the Police’s video, “Every Breath You Take.”   In the parody, the student playing Hubbard is a dead ringer.  Enjoy:

If you missed the original, click here: Police – Every Breath You Take

Hope these provided some relief.

Posted at 1:24 am

Friedman & Schwartz Aid (335/402): Podcast

February 24, 2009

Here is the link to the webpage hosting the podcast of tonight’s F&S study session.  Note: the last 15 minutes explore parallels between 1930-33 and 2007-2009 (i.e., the material is interesting – to me at least – but not quiz-able): F&S Study Session: 2-24-09.  Here is a short slideshow I used as an outline for my talk: Great Contraction Slideshow (F&S Study Session 2/24/09).

Posted at 9:24 pm

Class News (335/402): F&S Session Tonight

February 24, 2009

I have received a number of inquiries about the status of tonight’s Friedman & Schwartz study session.  The session is on.  Moreover, they will continue until I announce differently.  I will record the session in podcast form and link it to the blog later this evening.

Posted at 4:04 pm

Class News (335/402): Quiz/Exam Info

February 24, 2009

QUIZ INFORMATION
Fair game material for 2/25/09 quiz includes:

  1. 335/402: Friedman/Schwartz (F&S), ch. 7 (through 7.3 only)
  2. 335: “Real Interest Rates” (slides 11- end), “Nominal Interest Rates” (slides 1-29) & supporting Mishkin reading.
  3. 402: “Conditional Convergence and Long-Run Economic Growth” (entire slideshow), and “Introduction to the Equilibrium Business-Cycle Model (slides 1-6), & supporting Barro reading
  4. 335/402: WSJ Alert 7

FORMAT: 10-15 true/false, 50% from F&S (#1 above) & 50% non-F&S (#2 or #3, and #4) material.

Good luck

EXAM INFORMATION
Study Tips for Exam I are now in the 335 and 402 Exam Lockers.  All that is left to post (in re: Exam I)  is the list of candidate questions over textbook/lecture material.  Those questions will be posted tomorrow evening.

Posted at 2:15 pm

Friedman & Schwartz Aids (335/402): Exam Essays

February 24, 2009

As mention in class yesterday, roughly 1/3rd of next week’s exam will be an essay on F&S, chapters 1-7.5.  I promised to give you a list of questions and take the exam essay from that list.  The list of prospective F&S exam essays is now in the 335 and 402 Exam Lockers.

Information on tomorrow’s quiz as well as more tidbits on Exam I will be posted throughout the day.

Posted at 11:13 am

Class News (335/402): Miscellaneous Topics

February 23, 2009

Extra Credit
Both extra credit assignments (over “Anatomy of a Crisis” and “Inside the Meltdown”) are due in class next Monday (3/02/09).   Students in 335 and 402 will receive extra credit in both classes for completing the assignment satisfactorily.  Be sure your paper clearly indicates you are in both classes and notes the 402 section.

Slideshows Available
402 students: An updated version of “Condition Convergence” and part 1 of  “Introduction to the Equilibrium Model” are now in the Exam Locker.
335 students: An updated version of “Nominal Interest Rates” and “Risk & Term Structure of Interest Rates” are now in the Exam Locker.

Posted at 10:04 pm

WSJ Alert 7 (335/402): What is to be done?

February 21, 2009

Post title is taken from a 1902 pamphlet by Lenin calling for a revolutionary vanguardist party to direct the working class.  He argued workers, left on their own, would settle for trade unionism, so a focused party was needed to bring revolution.

Well now…  Seem to be having similar arguments about banks: Nationalize or “settle” for less?  You must prepare, comrades (smile).

Here is an WSJ piece (2/21, A1) with background: U.S. Seeks to Stem Bank Fears.  Here is an WSJ interview (2/20, online only) with a pro-nationalization NYU economist, Nouriel Roubini: WSJ – Nationalize the Banks. Here is an opposing view from Willem Buiter at the LSE (WSJ, 2/21, A11): ‘Good Banks’ Are the Cost Effective Way Out of the Financial Crisis. Note: Because you have an upcoming exam, this will be the only WSJ Alert for the 2/25 quiz.

Related “Further Study” Material (i.e. not quiz-worthy)
Gary Becker and Richard Posner discuss pay caps for bankers; neither is a fan.  Here are links: Posner on Caps and Becker on Caps.

Just for Fun
If you need music to read by, follow the link: Internationale – Moscow Radio Chorus. The Internationale is the anthem of international socialism, sung traditionally with a raised hand in clenched fist salute. (It is also the ringtone on my Bank cell phone, seriously). Here is more info (including lyrics): Wikipedia – The Internationale. Note: In case it is not clear, I do not think nationalization of U.S. banks is tantamount to communism.  I am poking fun at hysterical reactions.

Posted at 10:10 am