Monday, March 24, 2008

Working to fix the economy

A number of people who have been reading this blog have written to say that they are not sure if any of the candidates for president truly appreciate the extent of the country's economic situation. As an academic, some of my research focuses on the systemic and pervasive forces that have made the U.S. economy vulnerable to unfettered rent-seeking by powerful financial institutions. No candidate can, on the stump at least, go into the matter in academic detail. But Senator Clinton has been addressing the issue, both as a sitting Senator and as a leading Presidential Clinton. She's been working in the Senate and with federal policy makers since early in 2007 on the subprime mortgage problem. Today, Senator Clinton announced a Day One working group to confront the problem when (smile) she assumes office in November. On the campaign trail, Senator Clinton brings the issue to the personal level - take a look, and then read on.

The macroeconomic and regulatory issues plaguing the U.S. economy go beyond the mortgage crisis. But focusing on that problem makes it possible for politicians to get the attention of the big financial players in order to address the more complicated and fundamental dysfunctions that have led to to the subprime mortgage crisis. Delicate balances have to be struck to prevent a real crisis, such as preserving the value of the dollar versus freeing up inter-bank overnight lending or avoiding moral hazard while prudently prevently bank collapses.

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