What are Green Shoots?

What does ‘green shoots’ mean?

Green shoot refers to signs of economic recovery found in indicators like retail sales, orders for manufactured goods, the unemployment rate, fluidity in credit markets and the rate of home sales and construction.

What’s the significance?

Last spring, Federal Reserve chairman Ben Bernanke told 60 Minutes that he detected “green shoots” of economic recovery, and since then, the phrase green shoots has taken root among those desperate for an end to the current crisis.  But is there reason to be optimistic?

Who’s talking about it?

Mark Thoma from Economist’s View cautions policymakers from pulling back stimulus programs before a recovery is…

What are Legacy Loans?

What does legacy loan mean?

“Legacy loan” is a new term for adjustable-rate mortgages made during the recent housing bubble. Such loans stimulate exorbitant lending by offering homeowners short term “interest-only” or “minimum-only” payment options. Unfortunately, these rates readjust after only a few years to much higher levels, leaving many homeowners in the red and debt holders without payment.

What’s the significance?

Legacy loans are a main focus of the Geithner Plan for stimulating credit markets. Due to the increased default rate on legacy loans, their securitized value in the debt market has decreased drastically, and anyone holding such debt is incurring huge write…

What is a Clawback?

[Note: updated on 8.6.2010]

What does clawback mean?
Clawback refers to previously given monies or benefits that are taken back due to specially arising circumstances.

What’s the significance?
The Obama administration and members of Congress are currently discussing tax clawbacks designed to recoup the AIG bonuses.

Who’s talking about it?
Mother Jones blogger Kevin Drum is unimpressed by the argument that clawbacks in the AIG case would violate the sanctity of contracts, but wonders about the legality and fairness…Steve Randy Waldman of Interfluidity.com writes that the benefits of broad, well-crafted tax clawbacks could exceed their costs, but warns that an AIG one-off recovering less than half a…

What is a 99er?

What is a 99er?

The term ‘99er’ refers to those who have been out of work for over 99 weeks. State and federal unemployment benefits run out after that period, so these job seekers are left without a safety net.

What’s the significance?

In the current recession, at least 1.3 million people fall into this category, as job opportunities remain scarce. Little help has been given to this group. Although Congressional stalling on an unemployment benefits extension bill was finally ended and it was signed into law on July 22nd, it only covers those who have been unemployed for up to 26 weeks.…

What is a Bond Vigilante?

What is a bond vigilante?

A bond vigilante is a bond market investor who protests a country’s fiscal policies by selling off its bonds and refusing to buy them. This happens when the bond investors perceive the policy to be inflationary, and can act as a check on a government that is over-spending. The proof of vigilante action is high interest rates, as yields rise when investors perceive risk; this makes a government’s cost of borrowing rise.

What’s the significance?

Conservatives who worry about government spending have threatened that bond vigilantes will appear unless we cut the deficit. However, interest rates are low…

What is a Boondoggle?

[Note: updated on 8.6.2010]

What is a boondoggle?

Originally, the word meant a hand-made household or otherwise practical item, such as a key chain.  But during the New Deal, the meaning of the word changed: When a teacher with the Federal Emergency Relief Administration (a predecessor to the WPA) testified that he taught people how to make boondoggles, the media pounced on the word, and the meaning changed to what we know today: a project, often of government, that wastes time and resources.

What’s the significance?
Since the New Deal, boondoggle has been a populist criticism leveled by conservatives at everything from wasteful…

What is a Cramdown?

What is a cramdown?

A cramdown is when a bankruptcy court forces a bank to modify a loan, such as a mortgage, to reduce the principal debt, change the interest rate, or take other steps to help the bankruptcy filer. Under current bankruptcy law, courts can’t force these changes on mortgages taken out on a filer’s primary residence, as they can for car or student loans.

What’s the significance?

As a potential fix to the subprime mortgage meltdown, consumer advocates have pointed to cramdowns as a possible way to help underwater homeowners successfully modify their loans. It was introduced for inclusion in the…

What is a Filibuster?

What is a filibuster?

The Founding Fathers meant the Senate to be the cooling chamber for legislation, as opposed to the more nimble House. Therefore in the Senate, unlike in the House, debate on a bill can be endless. A filibuster occurs during debate when a Senator refuses to yield the floor and prevents a roll call vote from happening, often killing the bill. Filibusters give a minority of Senators, or even a single Senator, a chance to be heard. Think Jimmy Stewart in “Mr. Smith Goes to Washington.”

What’s the significance?

While in the past filibusters were used sparingly, coming up in…

What is Carried Interest?

What is carried interest?

Carried interest is a manager’s share of the profits of a hedge fund or private equity fund. It is meant as incentive to the manager and also often serves as his or her primary source of income.

What’s the significance?

Under the Bush tax laws, carried interest is taxed as return on investment, rather than as income. This is a big difference — the percentage goes from 35% taken from regular income (like our paychecks) down to about 15% taken from return on investment. It is often seen as a huge loophole for wealthy fund managers, who are effectively…

What is Saltwater Economics? What is Freshwater Economics?

What does the term saltwater economics mean? How does it differ from freshwater economics?
These two prevalent theories of economics can be attributed to two different groups of universities and institutions across the US. As economic theory developed in the 1970s, a clear divide became apparent between coastal schools and those in the Great Lakes area. Coastal schools gravitated towards the idea that the government could and should help to regulate the economy by controlling interest rates and budgets to avoid inflation or recession. Because of their location on the Atlantic and Pacific, they were of the “saltwater school of thought”.

Schools closer…

What is Shadow Banking?

Economic words and terms explained.

What is shadow banking?

Shadow banking refers to non-bank lenders that escape the regulatory oversight of many financial institutions. For example, because they don’t accept deposits like commercial banks, they are exempt from leverage ratio requirements, which allows them to have high debt levels. They are highly exposed to liquidity risk, because they rely on short-term financing for long-term investments (such as mortgage-backed securities). They also do not have the backing of a central bank as a lender of last resort.

What’s the significance?

These institutions play a large role in providing credit to our financial system and are…

What is TARP?

[Note: updated on 8..6.2010]

What does TARP mean?
TARP is an acronym for the Troubled Asset Relief Program of the US government to buy assets and equity from financial institutions in order to strengthen its financial sector. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis.

What’s the significance?
The effects of the TARP have been widely debated. Some of the questions that have arisen include: Are such funds viewed as windfall by banks? Do they result in changes in lending practices? Government officials overseeing the bailout have acknowledged difficulties in tracking the money and in…

What is the Buy American Act?

[Note: updated on 8.6.2010]

What is the Buy American Act?

The Buy American Act was passed under President Hoover in 1933. Its intent was to help American-owned companies by requiring the US government to buy products made in the USA.

The Buy American Act was tailored more specifically to purchases associated with transit-related projects costing over US$100,000. Projects authorized by the Federal Transit Administration (FTA) and the Federal Highway Administration (FHWA) are constrained by strict regulations detailing from where it is acceptable to purchase materials.

What’s the significance?

The Buy American Act puts foreign countries with competitive markets or lower prices at a disadvantage. The Act does…

What is the Civilian Conservation Corps?

Words and terms explained.

What is the Civilian Conservation Corps?

The Civilian Conservation Corps (CCC) was a public relief program enacted during FDR’s first 100 days in office that recruited young men to conserve and develop natural resources.

What’s the significance?

The program put 3 million men to work during the Great Depression, while at the same time accomplishing the goal of reforestation after the Dust Bowl. It planted 3 billion trees, built 97,000 miles of fire roads, improved state and federal lands, and acted as emergency relief against flooding. Thus, FDR dealt with unemployment and an environmental disaster in one fell swoop, while…

What is the Communications Act of 1934?

What is the Communications Act of 1934?

Written and passed during FDR’s first term, the Communications Act of 1934 consolidated existing radio, television, and telephone regulations and created the Federal Communications Commission (FCC) to oversee all interstate and foreign communications. It was intended to streamline the regulatory process and expand affordable access to communication services.

The bill also established regulatory standards for various types of communications, including Title I services, which are subject to looser restrictions, and Title II services, which fall under more rigorous “common carrier” rules intended to protect equal access to these networks.

What’s the significance?

As communications networks came to…

What is The Doom Cycle?

[Note: updated on 8.10.10]

What does it mean when someone refers to the “Doom Cycle,” or “Doom Loop”?

The “Doom Cycle” is a phrase often used to refer to the current boom-bust-bailout structure of the financial sector that leads to economic crises. Simon Johnson has been a major proponent of shedding light on this cycle, which he believes begins with risky investments and dangerous financial practices that lead to increased growth and profitability, but soon bust — bringing the financial sector to its knees after its inevitable collapse. After the bust comes the bailout, which, although may be necessary at the time, is…

What is the Federal Music Project (FMP)?

What is the Federal Music Project?

The Federal Music Project (FMP) was a federally funded arts initiative committed to the employment of displaced musicians and composers. It was an aspect of the Works Progress Administration of the New Deal and was established in July of 1935 by FDR.

What’s the significance?

The FMP employed musicians who had been hit particularly hard by the Great Depression. The program created new orchestras, musicianship courses, and encouraged a revival of traditional music and folk songs. Low cost or free concerts for children and adults provided venues for arts exposure. Retrained musicians could now not only support…

What is the Federal Theatre Project (FTP)?

What is the Federal Theatre Project?

The Federal Theatre Project (FTP) was a federally funded arts initiative committed to the employment of artists and directors. It was an aspect of the Works Progress Administration of the New Deal and was established on August 27, 1935 by FDR.

What is the significance?

The FTP employed thousands of displaced artists under the direction of Hallie Flanagan. Chapters of the FTP were given autonomy in the creation of art, often scripting politically and socially relevant plays open to the public for free. These works were often considered to lean to the left, inspiring controversy among the…

What is the Federal Writers’ Project (FWP)?

What is the Federal Writers’ Project?

The Federal Writers’ Project (FWP) was a federally funded arts initiative committed to the employment of writers and the creation of written work. It was an aspect of the Works Progress Administration of the New Deal and was established on July 27, 1935 by FDR.

What is the significance?

FWP employed over 6,600 Americans, ranging from writers and editors to archeologists and geologists. Each state, entitled to its own chapter, hired from the unemployment rolls.

While the main purpose of the FWP was to provide labor, it spurred the creation of great American works, including John Steinbeck’s The…

What is the FIRE Sector?

What does it mean when someone refers to the FIRE Sector?

The “FIRE Sector” (also often referred to as the “FIRE Economy”) is an acronym that denotes the industries of Finance, Insurance, and Real Estate. FIRE economies are able to generate huge profits without exhausting productive resources, since they rely almost exclusively on labor to conduct their most important work, which is making deals and securing agreements.

What is the significance?

The FIRE Sector has been at the heart of President Obama’s economic agenda. From the government bailout of Fannie Mae and Freddie Mac to caps on executive compensation at major banks, and…

What is the Glass-Steagall Act?

[Note: updated on 8.6.2010]

What is the Glass-Steagall Act of 1933?

The Glass-Steagall Act was introduced during the Great Depression by former Treasury Secretary Sen. Carter Glass (D-VA) and Chairman of the House Banking and Currency Committee Rep. Henry B. Steagall (D-AL). As one of the first acts of FDR’s New Deal, the legislation segregated commercial banks from securities markets, established the Federal Deposit Insurance Corporation (FDIC) and enhanced the regulatory powers of the Federal Reserve over banks.

What’s the significance?

The stock market collapsed in 1929; customers rushed to withdraw their funds, and by 1933, roughly 9,000 banks in the United States had failed.…

What is the Gospel of Prosperity?

What is the gospel of prosperity?

Just like it sounds, the gospel of prosperity is a movement that emphasizes the connection between finances and faith. An outcropping of the Pentecostal movement, the prosperity gospel, also known as “Health and Wealth Gospel” and the “Word of Faith,” teaches that God showers money and material goods on his believers. The reverse is also true: those who believe will be favored with riches. The gospel of prosperity first came onto the scene in the 1980’s with televangelists Jim Bakker and Jimmy Swaggart and has now morphed into a booming multi-million dollar industry led by Joel Osteen’s…

What is the Roosevelt Recession?

What is the Roosevelt Recession?

The Roosevelt recession refers to a period from mid-1937 to 1938 when the economic recovery from the Great Depression temporarily stalled, lasting about 13 months. The unemployment rate jumped from 14.3% to 19.0%, the first increase since FDR took office, and manufacturing output fell by 37% to 1934 levels. In response, in April 1938 Roosevelt got $3.75 billion in new spending from Congress, which was split among various recovery agencies, and the economy once again began to recover.

What’s the significance?

Economists still argue over what caused this dip, but Keynesians point to FDR’s spending cuts in June…

What is the Securities and Exchange Act?

[Note: updated on 8.6.2010]

What is the Securities and Exchange Act?

The act, passed in 1934, created the Securities and Exchange Commission (SEC), a market watchdog.  The SEC is part of the federal government and oversees brokerage firms and self-regulatory organizations like the New York Stock Exchange or the National Assocation of Securities Dealers, which runs NASDAQ.  The act authorizes the SEC to collect information periodically from companies with publicly traded securities.

What’s the significance?

The SEC has emerged as a key institution in the wake of the global economic crisis.  It has both taken partial blame for the financial meltdown and been charged with…

What is the Social Security Act?

What is the Social Security Act?

The Social Security Act was drafted under FDR’s first term, passed Congress as part of the New Deal, and was signed by FDR on August 14, 1935. The Act responded to the pitfalls of old age, poverty, unemployment, and dependent widows and fatherless children by providing benefits to retirees and the unemployed, as well as a lump-sum at death.

What’s the significance?

The Act was controversial at the time, with opponents arguing that it would kill jobs. It also excluded many women and minorities from receiving benefits. However, the Act has been modified over time to adapt…

What is the Tennessee Valley Authority?

[Note: updated on 8.6.2010]

What is the TVA?
The Tennessee Valley Authority was one of FDR’s most innovative New Deal ideas. The TVA was conceived to provide power production, navigation, flood control, erosion control, fertilizer manufacturing, and general economic development in the hard-hit Tennessee Valley region. Roosevelt asked Congress to create “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise,” and on May 18, 1933, Congress passed the TVA Act. TVA is a public corporation, managed by a board of three directors who are appointed by the President for nine-year terms…