The financial crisis and the massive federal response reshaped the world we live in. Though the economy is in one of its longest expansions and stock indexes have hit new highs, many people across the political spectrum complain that the recovery is uneven and the markets’ gains aren’t fairly distributed. The Wall Street Journal takes a look at some of the most eventful aspects of the response and how we got to where we are today.
Big Banks Get a Big Win in Senate Rollback Bill
Nation’s largest banks would gain incentive to buy more municipal bonds in legislation targeting smaller banks
.. a section aimed at making it easier for them to buy state and local bonds.
The provision, championed by Citigroup Inc. and other large banks, would ease a new rule aimed at ensuring banks can raise enough cash during a financial-market meltdown to fund their operations for 30 days, requiring them to hold more cash or securities that are easily salable.
Under federal banking rules approved in 2014, those “high quality liquid assets” included cash, Treasury bonds and corporate debt—but not municipal debt. Banks historically like to hold municipal bonds because of their safety and tax advantages.
.. Sen. Elizabeth Warren and 31 other Democrats who opposed the procedural vote.
.. State and local officials have praised the move, saying their securities could suffer if banks begin to shun them.
.. Analysts have said changing the rule for municipal products would be a mistake because it would erode the core of a bank-safety rule put in place after the 2010 Dodd-Frank law. While municipal securities have relatively low default rates, they are traded thinly and shouldn’t count as liquid assets, critics say.
.. “It’s an outrageously bad idea,” said Phillip Swagel, a professor at the University of Maryland who served in the George W. Bush Treasury, characterizing the provision as an implicit federal guarantee of the municipal market. In the next crisis, banks will have trouble selling their municipal securities, freezing up the market for them and requiring the government to step in to backstop it, he predicted.
Victor Cha: Giving North Korea a ‘bloody nose’ carries a huge risk to Americans
North Korea, if not stopped, will build an arsenal with multiple nuclear missiles meant to threaten the U.S. homeland and blackmail us into abandoning our allies in Asia. North Korean dictator Kim Jong Un will sell these weapons to state and nonstate actors, and he will inspire other rogue actors who want to undermine the U.S.-backed postwar order. These are real and unprecedented threats. But the answer is not, as some Trump administration officials have suggested, a preventive military strike. Instead, there is a forceful military option available that can address the threat without escalating into a war that would likely kill tens, if not hundreds, of thousands of Americans.
.. Some may argue that U.S. casualties and even a wider war on the Korean Peninsula are risks worth taking, given what is at stake.
.. A strike also would not stem the threat of proliferation but rather exacerbate it, turning what might be a North Korean moneymaking endeavor into a vengeful effort intended to equip other bad actors against us.
.. I also hope that if North Korea did retaliate militarily, the United States could control the escalation ladder to minimize collateral damage and prevent a collapse of financial markets.
.. the rationale is that a strike that demonstrates U.S. resolve to pursue “all options” is necessary to give the mercurial Kim a “bloody nose.”
.. If we believe that Kim is undeterrable without such a strike, how can we also believe that a strike will deter him from responding in kind?
And if Kim is unpredictable, impulsive and bordering on irrational, how can we control the escalation ladder, which is premised on an adversary’s rational understanding of signals and deterrence?
.. Some have argued the risks are still worth taking because it’s better that people die “over there” than “over here.” On any given day, there are 230,000 Americans in South Korea and 90,000 or so in Japan. Given that an evacuation of so many citizens would be virtually impossible ..
.. these Americans would most likely have to hunker down until the war was over.
.. To be clear: The president would be putting at risk an American population the size of a medium-size U.S. city — Pittsburgh, say, or Cincinnati — on the assumption that a crazy and undeterrable dictator will be rationally cowed by a demonstration of U.S. kinetic power.
.. An alternative coercive strategy involves enhanced and sustained U.S., regional and global pressure on Pyongyang to denuclearize. This strategy is likely to deliver the same potential benefits as a limited strike, along with other advantages, without the self-destructive costs.
- .. First, the Trump administration must continue to strengthen the coalition of U.N. member states
- Second, the United States must significantly up-gun its alliances with Japan and South Korea with integrated missile defense, intelligence-sharing and anti-submarine warfare and strike capabilities to convey to North Korea that an attack on one is an attack on all.
- Third, the United States must build a maritime coalition around North Korea involving rings of South Korean, Japanese and broader U.S. assets to intercept any nuclear missiles or technologies leaving the country. China and Russia should be prepared to face the consequences if they allow North Korean proliferation across their borders.
- Lastly, the United States must continue to prepare military options. Force will be necessary to deal with North Korea if it attacks first, but not through a preventive strike that could start a nuclear war.
.. This strategy gets us out of crisis-management mode. It constitutes decisive action, not previously attempted, by President Trump. And it demonstrates resolve to other bad actors that threats to the United States will be countered.
Do You Think Donald Trump Is Ready for a Real Financial Crisis?
The tax law and a push by the Trump administration to increase military spending will reduce federal revenue and force the Treasury to borrow more money when the economy is close to full employment. This could stoke inflation and prompt the Federal Reserve to tighten monetary policy. That, in turn, would slow the economy.
.. The prospect of a recession or financial crisis on Mr. Trump’s watch is unnerving, because he is as confident in his own abilities as he is lacking in knowledge and sound judgment. When confronted with criticism, he lashes out like an intemperate child.
On Monday, he said Democrats who did not applaud during his State of the Union address were un-American and treasonous.
.. If the stock market falls further, will the president try to reassure the public, or will he launch a Twitter fusillade blaming the drop on, say, a conspiracy hatched by the Senate minority leader, Chuck Schumer, and Tom Steyer, the billionaire hedge fund manager who wants Mr. Trump impeached?
.. Instead, he has stacked his administration with incompetent yes men, right-wing ideologues and Washington swamp dwellers. Consider the Treasury secretary, Steven Mnuchin, a former investment banker, who unnerved the currency market last month by suggesting that the United States was trying to weaken the dollar. His statement broke with the longstanding practice followed by Treasury secretaries from both parties to avoid making careless public pronouncements about American currency.
Mr. Mnuchin and Gary Cohn, the White House’s chief economic adviser, also debased their credibility last year by arguing with no evidence whatsoever that the Republican tax cut would pay for itself.
.. Paul Ryan, tried to pass off as good economic news that a public school secretary would take home an extra $1.50 a week as a result of the tax law.
.. Mr. Ryan, for one, is citing the deficit to make the case that the government needs to slash Medicaid, Medicare and other important government programs. Other members of his party are using the deficits to argue that the government cannot afford to repair and upgrade the country’s dilapidated infrastructure.