Thursday, December 03, 2009

Sen. Bunning Calls Bernanke's Fed "The Creature From Jekyll Island"

By Caitlin Kenney

Adam and Chana will have a fun play-by-play of Federal Reserve Chairman Ben Bernanke's confirmation hearing on Friday's Morning Edition. In the meantime, here's one of our favorite exchanges.

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Thursday, December 03, 2009

Eminent Domain Backlash?

By Daniel Costello

A New York Appelate court struck down the state's controversial 2008 use of eminent domain allowing Columbia University to buy a 17-acre site in West Harlem it wants for expansion.

In a 3-2 decision, the Appelate Division of the State Supreme Court called the state's controversial 2008 decision to take the property on behalf of Columbia "unconstitutional." Columbia wants to expand north of its upper Manhattan campus and has bought most of the land it needs. But a warehouse and gas station owner challenged the state's finding that the neighborhood is blighted and able to be condemned for sale.

The topic of eminent domain, and its use to clear blighted areas for economic development, is increasingly playing out in courts.

Four years ago, the U.S. Supreme Court decided 5-4 in Kelo v. New London that New London, Connecticut could condemn and acquire 26 acres of a neighborhood to build hotels, condos, and a Pfizer research center.

Soon after the ruling, New London spent nearly $80 million preparing the land but the redevelopment never got off the ground

Last month, Pfizer dealt a final blow to the project and the struggling seaport city by announcing that 1,400 jobs would leave the area as the pharmaceutical giant scales back amid tepid sales and a lack of new drugs in its pipeline. The move will vacate a 750,000 square foot complex built in 2001 and nothing is planned in its place.

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Thursday, December 03, 2009

What We Shouldn't Expect From The White House Jobs Summit

By Caitlin Kenney

We spoke to economist Russ Roberts today about how his views on economics have changed over time. Roberts told us he longer believes that we can find policy answers in empirical data and offered today's jobs summit as an example:

We have to be honest we don't really have a good idea of what creates jobs in this particular set of circumstances we're in. We have some past experiences, but even those which are inevitably what we use to base our studies on, those may not apply in this situation. This particular recession may be unusual it may have assets and aspects that don't replicate what happened before and therefore the policy answers are not likely to repeat themselves. So I think the whole idea of suggesting that we can a la physics or a la engineering, figure out the solution to the job creation problem, it's not just we're going to be off -- it's that whole enterprise is intellectually bankrupt.

It is the difference between economics and biology. In biology, a biologist doesn't pretend to know how many frogs there are at a particular point in time in the rain forest. He may have an estimate but if you ask him well "how many will there be in six months?", he can't give an honest answer about that. He can't even give you an honest answer and he won't pretend to give you an honest answer if you ask him well "what will happen in six months if something changes in the rain forest to the frog population?" That's what we expect of economists and that's wrong. We're not good at that.

We'll have our full interview with Russ Roberts on an upcoming podcast.

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Thursday, December 03, 2009

Jobs Summit: Public Benefit or Public Relations?

By Daniel Costello

When he announced a White House jobs summit last month, Mr. Obama said he was determined to meet the "great challenge" of unemployment. And what a challenge it is: the unemployment rate is at 10.2 percent -- a 26-year high and rising. Eight million jobs have been eliminated so far in two years of recession.

And yet it's hard to know exactly what will come from today's summit. Critics have complained it's more a glorified public-relations stunt and they may have a point.

While a slew of the country's best and brightest executives, financiers, small business owners and labor leaders are in Washington to discuss how to create jobs, even Press Secretary Robert Gibbs acknowledged yesterday that the government alone cannot repair economic damage this severe on its own. Translation: the White House was downplaying today's results before the start.

The reality is that the Administration, packed with some of the best known economists alive, already knows what tools it could use to help stem unemployment. Among them: extending unemployment benefits and subsidies for COBRA health benefits; more fiscal relief for cash-strapped states; new funds for direct job creation, especially for young people under 25 years old, who have a 19 percent unemployment rate, and African-American and Hispanic men who are facing joblessness at 34.5 percent.

Previous stimulus funds have helped. Just this week, the non-partisan Congressional Budget Office said the stimulus generated up to 1.6 million jobs during the fourth quarter, far exceeding even the administration's claims that it had saved or created 640,000 jobs. The Labor Department surprised everyone this morning by reporting that first-time unemployment claims fell to their lowest level in a year last week.

Still, the real results will come in the next few weeks when the Administration decides if it really wants to spend the political and deficit capital to pump up more jobs -- and if Congress goes along if it does. At the end of the day, that's likely alot more important to watch than what's going on today.

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Thursday, December 03, 2009

Letter: A New Holiday Tradition

George B. writes:

I had never heard of Joel Waldfogel, but I thought he had some great things to say in the interview. So, I wanted to tell you about a Christmas tradition in my family. A few years ago, many of the folks in my family on my wife's side were getting a bit stressed with all the Christmas shopping, planning, traveling and everything that we feel obligated to do. We discussed several gift exchange ideas to simplify things, and then someone had the idea to just give cash, but with a fun twist. Each year, when we get together for Thanksgiving, we bring cash for each person in the family. My mother-in-law brings an envelope for each person with our names on them. We all put cash into each person's envelope.

You can give as much or as little as you like, and no one really knows who gave what. Then we each secretly go buy gifts for ourselves, wrap them ourselves, and bring them when we get together for Christmas. As we go around the circle opening gifts everyone is surprised by what each person gets except the receiver. Everyone gets exactly what they wanted, and we have a lot of fun seeing what each person picked out for themselves. I should mention that we only do this for the adults in the family. We all still have fun buying toys for the kids, and they're generally easier to shop for anyway (not to mention that they will tell you exactly what they want if you need ideas). We've followed this tradition for several years now, and it really has been great.

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Thursday, December 03, 2009

Jobless Claims Fall To One-Year Low

By Daniel Costello

The number of people filing for new unemployment claims unexpectedly fell to a year low last week in another sign the lagging labor market is gaining momentum.

Initial jobless claims declined by 5,000 to 457,000 in the week that ended Nov. 28, the fewest since September 2008, a Labor Department report showed.

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Thursday, December 03, 2009

Morning Report: Comcast Seals The Deal; Wall Street Cuts Holiday Parties

By Daniel Costello

In a deal nicely explained by Andrew Ross Sorkin in the New York Times today, Comcast Corp. announced Thursday it plans to buy a majority stake in NBC Universal for $13.75 billion, giving the nation's largest cable TV operator control of the Peacock network, a stable of cable channels and a major movie studio.

Comcast's new heft, perhaps rivaled only by Disney - which Comcast CEO Brian Roberts already tried to buy - means movies may reach cable stations more quickly after leaving theaters, and TV shows could appear faster on cell phones and other devices.

Meanwhile, troubled Bank of America Corp. announced some good news late Wednesday. It will repay $45 billion it got from the government after raising $18.8 billion selling new shares.

As for the rest of the funds? The bank says it will use $26.2 billion in excess liquidity, such as cash and other holdings that can be sold quickly, over the coming months or years. The remaining $18.8 billion will be raised by selling new stock.

And at least Wall Street is killing some compensation this year: the holiday Christmas party.

Investment banks Morgan Stanley, Goldman Sachs, Bank of America and Citigroup all said they do not plan on hosting any company-sponsored holiday events this year. A Morgan Stanley spokesperson said the company plans on giving the money that would have been allocated for a party to a yet-to-be-determined charity.

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Wednesday, December 02, 2009

Podcast: Eye On Dubai

How many snowdomes does one gulf state need? (Chris Jackson/Getty Images)

On today's Planet Money:

The announcement earlier this week, that Dubai World, a company owned by the government of Dubai, was hoping to delay payment on $26 billion in debt sent stock markets across the world plummeting. Analysts were watching to see if investors would pull out of banks and investment firms with exposure in the Middle East or flee risky markets altogether.

By now, fears of Dubai's credit crisis spreading outside the country appear to have abated, but questions about Dubai remain, like, "what in the world were they thinking?" Dr. Christian Koch of the Gulf Research Center, says Dubai has a good economic strategy, but things got too crazy, too quickly. To Jane Meikle, a Canadian who has spent the last four years living in Dubai, sure the place went a little crazy, but that's part of what makes it so great. She talks about the upside of life in a gulf state boom town, where everyone is from somewhere else.

Download the podcast; or subscribe. Music: Weezer's "Island In The Sun." Find us: Twitter/ Facebook/ Flickr.

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Wednesday, December 02, 2009

Beige Book Offers Good News; Markets Unimpressed

By Daniel Costello

The U.S. Federal Reserve Beige Book survey released Wednesday showed the economy expanded or improved modestly across most of the U.S. between October and November as consumer spending rose and manufacturing improved.

Consumer spending strengthened since the last report, with sales of both general merchandise and autos improving across much of the country. Non-auto sales were reported to have picked up in the New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City, and San Francisco Districts; sales were described as steady or mixed in the Boston, Chicago, Minneapolis, and Dallas Districts. St. Louis described retail sales as below expectations and down from a year earlier. Auto sales generally improved since the last report, in some cases rebounding from a brief dip after the "cash-for-clunkers" program ended.

Commercial real estate and the job market remained weak, the report found.

Market conditions were reported to have weakened in virtually all Districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development. Expectations for 2010 were also quite low. Boston characterized the commercial real estate outlook as "bleak," Dallas noted that construction was at "historically low levels," and Kansas City described the sector as "distressed."

Investors appeared to play down the news in afternoon trading.

The Beige Book is a U.S. Federal Reserve report on the economy issued eight times a year and is used to help set policy at regular Federal Open Market Committee meetings. The next meeting will be held in two weeks.

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Wednesday, December 02, 2009

A Pirate "Stock" Exchange

By Daniel Costello

Gun-carrying pirates have been terrorizing shipping lanes around the Horn of Africa and the Indian Ocean in recent years as if they were living in the 16th century. The gangs have made tens of millions of dollars from ransoms, which are climbing even as nations have increased anti-piracy operations off the coast of Somalia.

One reason for that? A bustling Somalia pirate "stock" exchange that is helping local investors make profits off pirates' ransoms.

Located in Haradheere, about 250 miles northeast of Mogadishu, the exchange is open 24 hours a day. Business is so good the town is increasingly filled with luxury cars and other high priced goods.

"Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks," one wealthy former pirate named Mohammed told Reuters.

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Wednesday, December 02, 2009

The Falling Dollar And The N.H.L.

By Daniel Costello

Canada may be hockey obsessed but that hasn't always meant the Canucks had the best hockey teams. A few years back, the National Hockey Leagues even created a fund to help struggling Canadian teams pay for better players.

Oh, how things have changed -- largely because of the falling U.S. dollar. The Canadian dollar has been rising relative to the greenback since 2002 and the N.H.L. pay contract states players must be paid in dollars.

That's been a boon for the six Canadian teams.

According to Forbes's annual ranking of team valuations, released last month, is headed by the Toronto Maple Leafs, with the Montreal Canadiens and the Vancouver Canucks also in the top 10. Over all, the six Canadian teams' average ranking in the magazine's analysis is 12th in the 30-team league -- a sharp contrast with 2002, when the six Canadian teams averaged 21st.

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Wednesday, December 02, 2009

Morning Report: Fewer Job Losses In November; Google Blinks, A Little

By Daniel Costello

The U.S. private sector lost 169,000 jobs in November, according to the ADP employment report released Wednesday, signaling the labor market may be stabilizing along with other sectors of the economy.

It was the fewest jobs lost since July 2008. The private sector has shed jobs for 22 months in a row. Job losses peaked at 736,000 in March and have lessened every month since.

After mounting criticism from disgruntled media executives -- most notably News Corp. Chairman Rupert Murdoch -- Google said late Tuesday that it will begin allowing news publishers to limit the number of free articles accessed through its Internet search engine.

After failing to find other ways to get paid for online content, the media industry is considering blocking search engines' access to news content. It's unclear if such a move would push more online viewers toward newspaper web sites or simply reduce news viewership.

And North Korea has redenominated its currency by knocking two zeroes off the nominal value of banknotes to fight inflation and curb black markets, according to reports Tuesday.

The conversion rate was set at 100 to 1, so every 1,000 won bill is now being exchanged into a 10 won note. The switch essentially makes savings denominated in the old currency worthless.

Amid a lack of a modern financial and monetary system, North Korea has huge black markets that supply many of its goods, especially food. But the black markets, and the use of a growing supply of foreign currencies circulating in the country, have contributed to rising asset prices such as luxury apartment flats.

The move is likely to stem the inflation but if it cripples the operation of local markets, the consequences could be severe for the millions who depend on them for food. U.N. officials have estimated that as much as half the calories consumed by North Koreans come from food bought in black markets.

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Tuesday, December 01, 2009

General Motors' CEO Out

By Daniel Costello

After eight turbulent months at the helm of the largest U.S. automaker, chief executive Frederick "Fritz" Henderson is resigning. The company said Tuesday that Chairman Ed Whitacre Jr. will serve as interim CEO.

Henderson succeeded Rick Wagoner last spring after the Obama administration ousted the former CEO amid a government-led reorganization.

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Tuesday, December 01, 2009

Post (Climate) Game Analysis

How Mike Pesca almost (but not quite) wrecked planet earth.

By David Kestenbaum

Yesterday on the podcast we got six NPR reporters and editors together to play a game designed to look at whether the people of the world can come together to make the sacrifices necessary to combat climate change.

As it turned out we did save the planet, but just barely and at the very last possible moment.

This article lays out the basic rules.

NPR sports reporter Mike Pesca was the most selfish (sorry, strategic) player, managing to contribute very little to the global fund while keeping the most money for himself.

Mike was heavily subsidized by our counterterrorism correspondent Dina Temple-Raston who consistently put the planet's welfare before her own.

Here's a spreadsheet of how the game played out. You can see everyone's strategy, including Pesca's remarkable run of zero-contributions in four consecutive rounds.

Roughly what happened is that people donated money in the first round to try to prevent climate change, then tried to see if they could get by with less in the second round, which seemed to anger other participants, who then also lowered their contributions. But in the later rounds as doom approached people started to kick in more and more money. The largest contributions came in the final round.

Here's the original research paper laying out the experiment and a very readable commentary.

The game illustrtes how participants (countries or individuals) have an incentive to drag things out until the last minute, which perhaps helps explains the endless international climate treaty talks.

The research also shows that when there is perceived uncertainty about the consequences (how bad climate change will be) cooperation gets much more difficult.

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Tuesday, December 01, 2009

How Harvard Lost All That Money

By Daniel Costello

The Boston Globe had a terrific story this week looking at just how Harvard came to lose $1.8 billion in its cash accounts (separate from its massive endowment losses) over the past year. The tally could run even higher in the form of interest payments on bonds issued to cover the losses.

The story, by staffer Beth Healy, describes warnings from top officials about how risky some of Harvard's investment choices were becoming in recent years. At the top of the list of those who ignored many of those warnings? Harvard's then President Larry Summers, the former Treasury Secretary and current director of President Obama's National Economic Council and the White House economic team.

According to the story:

"In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.

Certainly, when it came to handling Harvard's cash account, the former US Treasury secretary had no doubts. Widely considered one of the most brilliant economists of his generation, Summers pushed to invest 100 percent of Harvard's cash with the endowment and had to be argued down to 80 percent, financial executives say. The cash account grew to $5.1 billion during his tenure, more than the entire endowment of all but a dozen or so colleges and universities."

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