August 25, 2019

Economix Blog: Front-Running the Release of Market Data

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

Today’s Economist

Perspectives from expert contributors.

A few weeks ago on my blog I saluted Eamon Javers of CNBC for his reporting about some traders who either seemed to be or admittedly were getting an early look at market-moving data.  Well, there have been some new developments.

As The New York Times reports, Attorney General Eric Schneiderman of New York is taking a close look at the practice to gauge the extent to which it creates unfair advantages for some traders.

I tend to think there are two types of early lookers (i.e., traders who get market-moving data anywhere from a few minutes to a few milliseconds before everyone else), though the article suggests that even these lines are blurred.

One type is a private service, as with the Michigan confidence survey, that releases the data to subscribers a few minutes early. Then there are the flash traders with fat data pipes, or as the article notes, servers that “co-locate” near the data-release servers.  All their algorithms need is a millisecond to make some fast — and I’m talkin’ fast — money.

The latter seems wrong in the sense that the data releases are set to come out at a given time but the flashers have found a way to beat the system — call it technological arbitrage.  The former case — privileged subscribers — seems legal but also wrong, though perhaps only in the sense that traders incorrectly believe there is untapped market value once the data are broadly released.   In fact, that value has been picked over by the early birds.

I’m not a lawyer — though Mr. Schneiderman is a uniquely able, just and ethical member of that trade — but none of this looks like a legal slam dunk to me.  The advantaged traders will surely cry foul, saying they have paid good money to get the goods before the rest of us suckers.  I’ll let the attorney general deal with them.

But until this is fixed, here’s the most important thing. Traders need to know the precise vintage of the information they are looking at. The fact that some are getting it before others is itself valuable knowledge. When this broke, a lot of folks claimed, “Oh, everybody knows that.” But everybody didn’t. So it is important to continue to pursue reporting that exposes such advantages.

And the other important thing is: Really? Millisecond trading advantages are helping our capital markets allocate excess savings more productively? This stuff is mostly froth and millisecond price arbitrage, and I say slow it down with a financial transaction tax (a small tax on trades). It would probably take a tax of just a few basis points to make things right.

Article source: http://economix.blogs.nytimes.com/2013/07/09/front-running-the-release-of-market-data/?partner=rss&emc=rss

Economix Blog: Putting Off the Employer Mandate

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

Well, I didn’t see that coming.  The Obama administration announced Tuesday afternoon that it was going to delay an important part of the Affordable Care Act for one year.  The rule requiring employers with at least 50 full-time workers to provide them with coverage or pay a penalty (also known as the employer mandate) will now be enforced starting in 2015, not 2014 as originally planned.

Here’s a very brief look at why, what, and what it means.

Today’s Economist

Perspectives from expert contributors.

A Treasury official published a blog post explaining that officials decided to give businesses more time to comply with the reporting requirements.  As The Times reported:

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, an assistant Treasury secretary, wrote on the department’s Web site in disclosing the delay. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

Though the mandate will ultimately affect only a few employers, it is actually an important piece of the law’s architecture.  Without it, employers who currently provide coverage to their workers could drop the coverage and send their workers over to the state health care exchanges.  And since some of those employees would be eligible for subsidies to help defray the cost, the employer would be shifting what is now a private cost over to the government.

The penalty for such actions was supposed to kick in next year; now they’ll kick in the year after next.  The government needs a bunch of information from businesses to determine if the penalty is warranted, and the White House is now saying that putting that reporting process in place is going to take longer than expected.

How will this affect coverage?  Hard to see it having much impact at all.  The important coverage aspects of the Affordable Care Act — the Medicaid expansion and the state health care exchanges — are still scheduled to be up and running by Oct. 1, the beginning of the fiscal year (of course, not every state has accepted the Medicaid part). And the requirement to have health insurance or pay a penalty – the individual mandate – will still take effect in 2014.

And a vast majority of employers with at least 50 full-time workers — about 95 percent — already offer coverage to the workers.  With the exchanges going up, there’s a chance some employers could try to pull off the cost shift noted above, but the mandate will be in place by 2015, so we’re unlikely to see much of that.

At least one report suggests a budgetary cost from the delay, since the revenues from penalties would flow to the Treasury Department.  But a colleague who tracks this stuff very closely tells me that while the Congressional Budget Office earlier this year scored this part of the bill as providing $5 billion to the Treasury next year, its most recent score dropped that to zero.  The budget office appears to have wisely assumed it was already going to take a while to get this part of the system up.

So, no budget cost, little impact on coverage.  Is this delay just not a big deal?

Um … this is Washington, folks, and we’re talking Obamacare.  There will be much hay made of this delay in coming days.  Conservatives will argue that this confirms that the law is unmanageable — which is a bit rich, since many of them have been trying to kill it, block it, and stop it in its tracks. (Speaker John Boehner’s press secretary, Brendan Buck, on Twitter: “Obamacare. Such a train wreck.”)  Liberals may argue that the administration is caving to business, which just wants to put off the paperwork for a year.

I think it’s an unfortunate delay of an important but relatively small piece of the bill, more growing pains of the type I’m sure Medicare had when it got going than anything existential. But that’s not how it will play in the hurly-burly of the next few days of Washington politics.

Article source: http://economix.blogs.nytimes.com/2013/07/02/putting-off-the-employer-mandate/?partner=rss&emc=rss

Media Decoder: Hollywood’s Passion for Guns Remains Undimmed

As the blockbuster film season unfolds, every major studio has firearms of one sort or another in its marketing arsenal. At Sony Pictures Entertainment, Channing Tatum clutches a sidearm the size of Wyatt Earp’s as he walks Jamie Foxx to safety on the poster for “White House Down.”

At Paramount Pictures, Brad Pitt, zombie hunter, has an even bigger piece of personal artillery slung across his back in the promotional art for “World War Z.”

Johnny Depp packs a pistol in his pants on the poster for Disney’s “The Lone Ranger.” Melissa McCarthy grips what appears to be a full-blown grenade launcher in the advertisements for 20th Century Fox’s “The Heat.”

The glowing handguns on the art for Universal’s “R.I.P.D.” have a preternatural look; but what really gets your attention are those chillingly real guns being flashed by Denzel Washington and Mark Wahlberg, standing back to back, on the poster for the same studio’s “2 Guns.”

Warner Brothers, whose “The Dark Knight Rises” was playing in Aurora during last July’s shootings, has been soft-pedaling weaponry on its posters lately (unless you count the robots and helicopters pounding each other in the ads for “Pacific Rim”).

Still, Ken Jeong had some hot handgun moments in the red-band trailer for “The Hangover Part III.”

After the discussion of gun violence and pop culture at a January meeting between Vice President Joseph R. Biden Jr. and a number of entertainment executives, the Motion Picture Association of America, an industry trade group, bolstered its ratings system with a campaign to remind parents of the content advisories that accompany a movie’s letter rating.

But don’t look for any move to change the movies, or the high-caliber images used to sell them. “We believe our role is to help parents be informed of a film’s content, not to dictate the content in any way,” Kate Bedingfield, an M.P.A.A. spokeswoman, said in an e-mail last week.

MICHAEL CIEPLY

Article source: http://www.nytimes.com/2013/06/24/business/media/hollywoods-passion-for-guns-remains-undimmed.html?partner=rss&emc=rss

You’re the Boss Blog: Many Expect Budget Cuts to Hit Small Businesses Hard (But Not the N.F.I.B.)

The Agenda

How small-business issues are shaping politics and policy.

Economists have been warning for months that if the $85 billion in indiscriminate budget cuts known as the sequester take effect, the consequences for the economy could be dire. But for small businesses, the prospects may be even worse.

“Government spending is at 8 percent of gross domestic product, and at a time like this, when the private sector is still climbing off the mat, the last thing you need is for the public sector to pull out,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and formerly the chief economic adviser to Vice President Joseph R. Biden. “So nonpartisan analysts predict that if the sequester takes hold, it will lower the growth rate of G.D.P. by half a percent. And that translates to an unemployment stuck at 8 percent and hundreds of thousands of fewer jobs.”

Small businesses, Mr. Bernstein added, will bear the brunt of it. “Smaller businesses tend to be more locally dependent,” he said. “They tend not to be multinationals. If you’re a multinational and the economy is not doing well here, you shop around the globe for economies that are doing a lot better.” Moreover, he said, “a lot of small businesses don’t have the access to credit markets, so it’s tougher for them to get through periods of a down economy.”

According to Stephen Fuller, a professor at George Mason University’s School of Public Policy, the budget cuts required by sequestration amount to $35 billion in payroll costs and about $50 billion in procurement expenses. All told, Mr. Fuller said, these cuts would result in 1.4 million lost private-sector jobs. Those lost jobs include positions at federal contractors, as well as at businesses that serve those contractors and, even less directly, at the businesses that depend on spending by government and contractor employees.

Small businesses, Mr. Fuller said, would lose just over half of those jobs.

“So many of these small businesses don’t realize how dependent they are to the federal government because they’re not the contractors — they are suppliers and vendors to the contractors,” said Mr. Fuller, who testified (pdf) at a House Small Business Committee hearing last September on the effect of sequester. “They’re the ones who water the plants and secure the buildings.” Small businesses will suffer from the reduced federal and private sector payroll because of the important role they play in the consumer economy, as retailers and restaurants. “However you allocate the consumer budget across the economy, there’s a large number of small businesses,” Mr. Fuller said.

Small businesses that deal directly with the federal government would fare even worse. According to the Small Business Administration, small businesses received $91 billion in prime federal contracts in 2011, or just under 22 percent of the total contracts available to small companies.* However, according to Mr. Fuller’s calculations, small companies would account for about 34 percent of the job losses at prime contractors under the sequester. (Since Mr. Fuller’s testimony, Congress reduced the amount of the sequester as part of the New Year’s fiscal cliff legislation. While the overall job losses would be lower as a result, Mr. Fuller said the share coming from small businesses would likely change only slightly.)

Small businesses “can’t survive on the loss of 10 or 20 or 30 percent of their revenues,” he said. “They can’t continue operating at half-speed or two-thirds speed. They don’t have a cushion that a large publicly traded company would have.” Large federal contractors can shift employees across business lines — most have both civilian and federal divisions — and geography. Small companies that specialize “can’t learn new tricks that quickly.”

Officials in the Obama administration, asked to comment on how small businesses could be affected by cuts to federal procurement, declined to be specific. “Should sequestration occur, small businesses, like other business, will be impacted as agencies are forced to allow certain contracts to lapse and de-scope, or terminate other contracts that would be no longer affordable,” said an Obama administration spokesman who asked that his name not be published. The spokesman would not say whether government agencies would attempt to stretch out payments to vendors in order to make the money last longer. For example, in September 2011, the administration announced its so-called QuickPay program, which attempted to cut the government’s payment time to small companies from 30 days to 15 days. The spokesman did not say whether the administration would continue this initiative.

However, Mr. Fuller said agencies would not likely cancel existing contracts, since the money for these has already been appropriated. Rather, he said, agencies would probably not extend some of those contracts or issue new ones. Because of the way the federal government spends money — purchasing is typically concentrated in the last three months of the fiscal year, which ends in October — the impact of the sequester would most likely be felt beginning in July.

The sequester would also scale back programs at the S.B.A. According to the administration, loan guarantees would be reduced by $902 million, from $22 billion to just over $21 billion. And the agency told (pdf) the Senate Appropriations Committee that cuts to its counseling programs would force the agency’s partners to turn away at least 33,000 business owners seeking assistance.

Not everybody was so pessimistic. Holly Wade, a senior policy analyst at the National Federation of Independent Business, said it was impossible to know whether the sequester, should it take effect, would harm the economy. “If the economy contracts overall, that will affect small businesses,” she allowed. But she downplayed the prospect of specific threats to small businesses. “Few small businesses have contracts with the federal government, and few small businesses get loans from the S.B.A.,” she said.

The N.F.I.B., she added, has not taken a position on whether the sequester should go into effect.

*However, as The Agenda has noted before, both of these figures — the total contract dollars awarded to small businesses and the total contract dollars for which small businesses are eligible — are slippery. The total awarded to small companies is almost certainly overstated and the total available to them is likely understated.

Article source: http://boss.blogs.nytimes.com/2013/02/21/many-expect-budget-cuts-to-hit-small-businesses-hard-but-not-the-n-f-i-b/?partner=rss&emc=rss

Obama’s Pick for Treasury Is Said to Be His Chief of Staff

If confirmed by the Senate, Mr. Lew, 57, would be Mr. Obama’s second Treasury secretary, replacing Timothy F. Geithner, the last remaining principal on Mr. Obama’s original economic team, at the head of that team.

While Mr. Lew has much less experience than Mr. Geithner in international economics and financial markets, he would come to the job with far more expertise in fiscal policy and in dealing with Congress than Mr. Geithner did when he became secretary at the start of Mr. Obama’s term. That shift in skills reflects the changed demands of the times, as emphasis has shifted from the global recession and financial crisis of the president’s first years to the continuing budget fights with Republicans in Congress to stabilize the growth of federal debt.

The partisan tension over the budget between Mr. Obama and Republicans suggests that Mr. Lew will face a grilling by Senate Republicans in confirmation hearings. But despite weeks of speculation that Mr. Lew would be named Treasury secretary, Republicans have not signaled that they plan to mount the kind of opposition they raised to Mr. Obama’s potential nomination of Susan E. Rice, the ambassador to the United Nations, for secretary of state, and Chuck Hagel as secretary of defense; the president named Mr. Hagel on Monday, and eventually settled on Senator John F. Kerry, Democrat of Massachusetts, for secretary of state.

Mr. Lew’s departure would create an important vacancy for what would be Mr. Obama’s fifth White House chief of staff, a turnover rate that is in contrast with the stability at Mr. Geithner’s Treasury. Leading candidates are said to include Denis McDonough, currently the deputy national security adviser in the White House; and Ron Klain, a former chief of staff to Vice President Joseph R. Biden Jr.

Mr. Lew had a brief turn in the financial industry before joining the Obama administration four years ago, working at the financial giant Citicorp, first as managing director of Citi Global Wealth Management and then as chief operating officer of Citigroup Alternative Investments.

His first job with Mr. Obama was at the State Department, where Mr. Lew was the deputy secretary responsible for managing day-to-day operations of the department and its international economic policy. Secretary of State Hillary Rodham Clinton protested to Mr. Obama when the president in 2010 tapped Mr. Lew to replace Peter R. Orszag as budget director.

It was Mr. Lew’s second stint heading the Office of Management and Budget. He previously served in President Bill Clinton’s second term, helping to negotiate a bipartisan budget deal with Congressional Republicans that led to four years of budget surpluses. In the 1980s, Mr. Lew was a senior aide to House Speaker Thomas P. O’Neill, a Democrat, also advising in budget negotiations with President Ronald Reagan.

He has been deeply involved in the deficit negotiations over the last two years. And, if he were quickly confirmed, as Treasury secretary his first test could come as soon as next month, when analysts expect a fight over raising the debt ceiling, which is the legal limit on the amount that the government can borrow.

Republican leaders have said they would refuse to raise the ceiling unless Mr. Obama agrees to equal spending cuts, particularly in entitlement programs like Medicare and Social Security. Mr. Obama has said that he will not negotiate over the ceiling, with the country’s full faith and credit at stake.

With battle lines already drawn, the country is expected to run out of room under the ceiling sometime between mid-February and March. At that point, Congress would need to raise the borrowing limit, or the country would start defaulting on obligated payments, like those promised to seniors, doctors, contractors and bondholders.

Mr. Lew’s role as an Obama negotiator in 2011 did not endear him to Republicans, in particular House Speaker John A. Boehner, and he took a lower-profile role in the most recent negotiations at year-end. The White House was eager to avoid controversy given the likelihood of Mr. Lew’s nomination to Treasury. Instead Mr. Geithner and Rob Nabors, the director of legislative affairs, were lead negotiators.

Mr. Lew, a native of New York, is known for his low-key, professorial style and organizational skills. While he was a favorite of Mr. Obama and other staff members as chief of staff, Mr. Lew made it known that he did not want to continue in that post for a second term.

Article source: http://www.nytimes.com/2013/01/10/us/politics/obama-to-name-jacob-j-lew-as-treasury-secretary.html?partner=rss&emc=rss

House Takes On Fiscal Cliff

House Republicans were planning to meet at 1 p.m. to discuss the Senate legislation, cobbled together after furious negotiations between Vice President Joseph R. Biden Jr. and the Republican Senate leader, Mitch McConnell, to avert automatic tax increases for all but the wealthiest Americans and put off, for two months, large cuts to the Pentagon and other areas of government.

Representative Nancy Pelosi of California, the House Democratic leader, said she would also present the plan to House Democrats and Mr. Biden, who helped sell the deal to Senate Democrats on Monday night, was set to meet with members of his party in the House just after noon.

With just two days to go before a new Congress convenes, the House has essentially three choices: reject the bill, pass it as written by the Senate after what is certain to be a robust, even rancorous debate, or amend the bill and quickly return it across the rotunda to the Senate. Should the House choose to amend the measure, it would almost certainly imperil its chances of becoming law before the new Congress convenes. The Senate compromise, which enjoyed wide bipartisan support, was so hard fought and senators do not anticipate taking another vote on it.

Any failure to pass the measure before the 112th Congress ends as of noon Thursday would require the process to start over in the new 113th Congress, meaning the Senate would have to vote again with a changed membership due the departure of several veteran lawmakers and the arrival of newcomers from both parties as a result of victories in the November elections.

But the strong, bipartisan 89-to-8 vote in the Senate about 2 a.m. on Tuesday will put strong pressure on the House to approve the legislation since a defeat would essentially leave the House responsible for a steep series of tax increases and spending cuts that some economists warn could send the nation back into a recession.

Yet it was clear Tuesday morning that many House Republicans were disenchanted with the plan, which, while containing many concessions that angered Democrats, still favors the latter party’s priorities and imposes a tax increase on the wealthiest Americans.

“I am halfway through reading it and haven’t found the cuts yet,” said Representative Trey Gowdy of South Carolina, who generally votes against budget bills. “It’s part medicinal, part panacea, and part treating the symptoms but not the underlying pathology.”

Democrats have their own issues with the measure due to what they see as too many concessions on taxes, making it apparent some combination of Democrats and Republicans will have to come together behind the measure if it is too clear the House and be sent to President Obama for his signature.

Speaker John A. Boehner and Representative Eric Cantor of Virginia, the House majority leader, arrived at the Capitol early Tuesday to begin working, but a spokesman for Mr. Cantor, Doug Heye, said no decision had been made on how to proceed.

Article source: http://www.nytimes.com/2013/01/02/us/politics/house-takes-on-fiscal-cliff.html?partner=rss&emc=rss

Solyndra Executives Take Fifth at House Hearing

Brian Harrison, the chief executive, and Wilbur G. Stover, the senior vice president and chief financial officer — each with a lawyer and a single sheet of paper with the text of a statement that he read over and over again, explaining that he was respectfully declining to answer questions — appeared before the oversight and investigations committee of the House Committee on Energy and Commerce. The committee is examining how the company failed after getting $528 million in government loans.

The case is an acute embarrassment for the Democrats because Solyndra was the first loan guarantee approved by the Obama administration under a program designed to generate jobs and invigorate the American solar industry. When the loan was approved, Vice President Joseph R. Biden Jr. announced it, and later, President Obama visited the factory in California.

“How does a company go from having the president of the United States visit it to having the F.B.I. come in and confiscate its files?” asked Representative Joe L. Barton, a Texas Republican.

Democrats addressed their chagrin as well; Representative Diana DeGette of Colorado, the ranking Democratic member, who had requested that the two executives be called as witnesses, recalled how Mr. Harrison had met with her and other members of Congress in late July. “I don’t know how they could paint such a rosy picture to us, and declare bankruptcy five weeks later,” Ms. DeGette said.

The witnesses had no friends on the committee, but after repeated questions from members about what the company did with the money and how the executives could have failed to see impending problems, Representative Henry A. Waxman, the California Democrat, complained to the subcommittee chairman, Representative Cliff Stearns of Florida, that the right against self-incrimination was meaningless if the witnesses had to sit through repeated accusatory questions that everyone knew in advance they would not answer. The atmosphere brought to mind newsreel depictions of the House Un-American Activities Committee questioning witnesses suspected of being Communists.

The bankruptcy’s timing could hardly be worse for the solar industry; about $9 billion in additional loan guarantee money is available, but by law, projects must break ground by Sept. 30. On Thursday, the sponsor of three major projects that had received tentative approval said that at least one of them would certainly not meet the deadline and that the two others might not either. About 1,000 megawatts of power is at risk, according to the industry’s trade association.

But the Republicans, with evidence in hand that the Solyndra loan was moved through quickly in the late stages, has publicly cautioned the Department of Energy and the White House not to act in haste in the last days of the program, which was paid for as part of the stimulus bill.

In fact, committee members were divided about whether the Solyndra bankruptcy was a reason to put the brakes on the whole program. Ms. DeGette said, “It would be to our long-term economic peril if we cede leadership to any other nation in clean-energy technology development.” But Representative Michael C. Burgess, Republican of Texas, referred to a vote on Thursday night by the House to cut money for loan guarantees for electric cars, to help pay for disaster relief.

“Yes, we took that money back,” Mr. Burgess said. “If the D.O.E. is going to be chumps, the very least we can do is corral what they’re doing.”

A prominent Democrat, Representative Edward J. Markey of Massachusetts, said, “The Republican majority is recklessly exploiting this one case to advance a political agenda that is very clearly aimed at wrecking” government support for renewable energy.

But Mr. Markey is pursuing a separate point: that the appropriate lesson to draw from Solyndra is that the much larger loan guarantee that has been promised for construction of a twin-reactor nuclear plant in Georgia deserves closer scrutiny.

Article source: http://feeds.nytimes.com/click.phdo?i=a19d70fe73b56f0c4e6af2b7c0089f58

China’s Economy Faces Obstacles in Rebalancing

China has vowed repeatedly, most recently during the just-concluded visit by Vice President Joseph R. Biden Jr., who met in this city with Vice President Xi Jinping, to overhaul its state-directed growth model and empower its consumers to spend more on their own, something that would makes its economy more sustainable and help the sluggish world economy as well. But leaders in Beijing and places like Chengdu are finding it difficult to steer China away from growth that relies largely on infrastructure projects, construction and export manufacturing, economists and financial analysts say.

“China’s leaders are committed to altering their country’s macroeconomic landscape,” Evan A. Feigenbaum, a China analyst at Eurasia Group, a global consulting firm, said in a statement attached to a report released Aug. 17. “But the country’s political economy will not change as fundamentally as many in China and abroad hope. And the next decade is likely to be more fraught than conventional wisdom suspects.”

China has incentives to change its model: its economic policies contribute to wasted resources, vast social inequality and a soaring inflation, which leaders fear will fuel social instability. The consumer price index went up 6.4 percent year-on-year in June, the biggest jump in three years. The 12th Five-Year Plan, a blueprint for development from 2011-15, gives an outline for better distributing economic growth across the country, and thus giving households more spending power.

Yao Yang, an economist at Peking University, said Chinese leaders knew that the domestic economy put too much money in the hands of corporations and the government. They agree that they have to increase social welfare to encourage domestic consumption and dampen mass discontent.

But there are obstacles that limit the ability of leaders to shift direction. For one thing, China continues to empower its large state-owned enterprises at the expense of private entrepreneurs, which results in market inefficiencies on where and how capital should be allocated, analysts say. Those large enterprises have enormous influence on policy makers. State banks also tend to favor government-backed projects, which are often capital-intensive endeavors like infrastructure building.

At the provincial and lower levels, one reason officials support capital-intensive projects arises from the way such officials are measured by the central government in annual reports. The rate of local G.D.P. growth is a top criterion by which the officials are judged. Their careers depend on it, and capital-intensive projects give short-term lifts to growth numbers. Another reason officials promote such projects is corruption: it is relatively easy to take bribes or skim money from large state investment projects.

To cope with the global downturn in 2008, the central government pumped $586 billion of stimulus money into the economy and loosened lending by state banks. Companies set up by local governments borrowed heavily. Victor Shih, a Northwestern University professor, said that based on official figures released this summer, total local government debt across China is $2.4 trillion to $3.1 trillion. The upper estimate is equal to half of China’s G.D.P. in 2010. Interest payments on the debt amount to more than $150 billion per year.

“Right now, the banks are encouraged to ‘restructure’ all of this debt such that little of it will become nonperforming loans,” Mr. Shih said in an e-mail. “However, there might be a problem if inflation is high or if deposits continue to leave the banks’ balance sheets.”

In the first half of 2011, even Chengdu, whose 15 million residents have a reputation as laid-back, tea-drinking, spicy-food-loving sybarites, had an impressive 15.1 percent real growth rate that was significantly higher than the national average, according to an official report. Such rapid growth in an interior city can help with economic rebalancing. It redistributes wealth and shifts consumer spending away from the much wealthier coast. But it raises questions about the local economic model.

Li Bibo contributed research from Beijing.

Article source: http://www.nytimes.com/2011/08/25/world/asia/25china.html?partner=rss&emc=rss

House Again Seeks Votes, After Failing to Pass Debt Plan

“Any solution to avoid default must be bipartisan,” Mr. Obama said. “I urge Democrats and Republicans in the Senate to find common ground on a plan that can get support from both parties in the House, a plan that I can sign by Tuesday.”

Mr. Obama urged Republicans in the House and Senate to abandon a bill that “does not solve the problem” and has no chance of passage in the Senate.”

“There are a lot of crises in the world that we can’t always predict or avoid, he said. “This isn’t one of those crises.”

But there was no clear signal what the next step would be. Among the several possibilities were changes to the House bill, an attempt by Senate Democrats to leapfrog forward with their own plan, or a new attempt to reach a compromise on the part of all the major players.

In an effort to break the logjam, Senator Harry Reid, the majority leader, called on Senator Mitch McConnell, the Republican leader, to meet with him on Friday to try to resolve to the stalemate, given the failure of House Republicans to advance their own budget proposal.

“My door is open,” Mr. Reid said as the Senate convened. “I will listen to any idea to get this done in a way that prevents a default and a dangerous downgrade to America’s credit rating. Time is short, and too much is at stake, to waste even one more minute.

“The last train is leaving the station,” he said. “This is our last chance to avert default.”

Mr. McConnell, who had earlier been working with Mr. Reid on a fallback plan, abandoned that attempt and has been supporting the effort by the House speaker, John A. Boehner, to push through a proposal that would raise the debt limit in two stages — an approach flatly rejected by Senate Democrats and the White House. Mr. McConnell also had been talking with Vice President Joseph R. Biden Jr. but broke the conversation off while the Boehner plan was pending.

Mr. McConnell, too, came to the Senate floor and offered little indication that he was ready to deal, accusing Democrats of devoting recent days to undermining the House plan. “Our Democratic friends in the Senate have offered no solutions to the crisis that can pass either chamber,” he said.

Mr. Reid said he would be moving within hours to force votes on his own plan to cut spending by about $2.5 trillion over 10 years and raise the debt limit through 2012, a move that would lead to a crucial showdown vote over the weekend. He said he would be making changes to his measure to attract more support but made clear that he considered the Senate plan the final effort to avert a default next week.

“There will be no time left to vote on another bill or consider another option here in the Senate,” he said. “None.”

Mr. Reid said he had also had a “sobering” conversation on Friday with Treasury Secretary Timothy F. Geithner about the consequences of a default.

“It is really precarious for our country,” he said. Just minutes from a roll-call vote on the plan pushed by Mr. Boehner, Republicans stunned the House on Thursday by interrupting the debate and turning to routine matters while Mr. Boehner and his lieutenants tried to pressure reluctant conservatives into backing their plan. The House then went into a recess and shortly before 11 p.m., the leadership announced that no vote would be held.

The surprise postponement threw the endgame of the debt limit clash into confusion and raised concerns among some on Capitol Hill that the government was lurching toward a default. The White House and Senate Democratic leaders had been waiting for the House to act before making their next move with an eye on the Tuesday deadline set by the Treasury Department for raising the debt ceiling or facing the possibility that the government would not be able to meet all its financial obligations.

Republicans had expressed confidence throughout Thursday that they would round up enough recalcitrant conservatives to pass their plan, but they obviously miscalculated.

Article source: http://feeds.nytimes.com/click.phdo?i=20e8305972f909d42af010d494295722

Short-Term Increase in Debt Limit Suggested

“If we can’t do something really significant about the debt ceiling, then we’ll probably end up with a very short- term proposal over a few months, and we’ll be back having the same discussion in the fall,” Senator Mitch McConnell, the minority leader, said Sunday on the CBS program “Face the Nation.”

Economists and Obama administration officials are warning of a calamity if the government defaults on its obligations. The default deadline is Aug. 2.

Still, a leading Democrat said the two parties were coming closer together on the debt limit and deficit reduction.

“Progress is being made,” Senator Dick Durbin, the second-ranking Democrat, said on “Meet the Press” on NBC. “We shouldn’t wait until high noon” to raise the debt ceiling because “it will mean higher interest rates if we don’t.”

Vice President Joseph R. Biden Jr. is leading bipartisan Congressional talks on the debt limit and cuts in federal spending.

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