By Douglas Holtz-Eakin
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Independent voices from the TWT Communities
Nearly three years after Congress passed the most far-reaching new regulations on Wall Street since the Great Depression, worries have resurfaced that the biggest U.S. banks have only grown in size and remain bailout candidates because they are "too big to fail."
The Dow Jones industrial average on Tuesday surged convincingly past its previous record and landed at an all-time high of 14,253.77, fueled by record corporate profits and the loose money policies of global central banks.
The stock market on Thursday plodded rather than soared, flicking between small ups and downs after two days of triple-digit gains.
The U.S. economy just barely eked out a quarter of growth at the end of last year, according to revised estimates published by the Commerce Department on Thursday morning.
Strong earnings from Home Depot helped lift the Dow Jones industrial average Tuesday. A jump in home sales and consumer confidence also brought buyers back to the market after a big sell-off Monday.
Federal Reserve Chairman Ben S. Bernanke Tuesday morning warned Congress that $85 billion of across-the-board spending cuts due to start on Friday will dampen economic growth this year.
Lending to homebuyers in the U.S. remains little above the depressed levels hit during the recession because banks are wary about lending amid a slew of regulations coming out next year and proliferation of enforcement actions by state and federal regulators, a top mortgage banking official told The Washington Times.
The U.S. economy grew at an annual rate of 3.1 percent over the summer as consumers spent more and state and local governments added to growth for the first time in three years — but the economy is likely slowing in the current quarter.
Everything you ever wanted to know about the Obama economy is in a single sentence about the Federal Reserve Board's latest attempts this week to deal with unacceptably high unemployment.
The Federal Reserve on Wednesday for the first time announced a new target of 6.5 percent unemployment for the U.S. economy — down from the current 7.7. percent — and started an additional easing program aimed at achieving that goal.
Mitt Romney decried the Dodd-Frank Act as "the biggest kiss that's been given to New York banks I've ever seen." Since its passage, 122 community banks have closed. If the election had turned out differently, there would have been a prospect of repealing Dodd-Frank. There still may be grounds for a modicum of reform, particularly of "too big to fail" (TBTF) banks and doctrine.
Even with ho-hum growth, the U.S. is starting to look like an outperformer in a world where Britain and the rest of Europe are in a double-dip recession, Japan is falling into what may be a triple-dip downturn, and some formerly robust emerging markets recently have slowed to a near-standstill.
Abig issue is missing in the debate over the "fiscal cliff": how to get the Obama economy growing again, fueling capital investment, jobs and higher incomes.
Federal Reserve Chairman Ben S. Bernanke on Tuesday urged Congress and the Obama administration to strike a budget deal to avert tax increases and spending cuts that would send the government over a "fiscal cliff" in January and could trigger a recession next year.
U.S. homes are entering the foreclosure process at a slower pace than a year ago, and fewer properties are being repossessed by lenders, new data show.
"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy," he told the Senate Judiciary Committee. "That is a function of the fact that some of the institutions have become too large ... [which] I think it has an inhibiting influence."
Despite the Fed's concern, the central bank could contribute to the mortgage market's woes in the next year or two when it starts to sell off the trillions of dollars of mortgage bonds and Treasury securities it has accumulated since 2008 as it sought to drive interest rates lower through unconventional bond-purchase programs, he said.