Brookings: Experts - Douglas J. Elliott

Telling the Narrative of the Financial Crisis: Not Just a Housing Bubble

Mon, 23 Nov 2009 00:00:00 GMT

What really caused the great economic crisis of the past year? Should the Fed’s powers be stripped away, per legislation sponsored by Rep. Ron Paul that recently passed the House Financial Services Committee? In an effort to help inform the debate, Brookings Fellow Douglas Elliott and Senior Fellow Martin Baily ponder the importance of public perceptions of the causes of the crisis - and how they will affect chances of financial regulatory reform.

Fixing the Financial Sector in the Wake of the Economic Crisis

Mon, 16 Nov 2009 10:37:21 GMT

Sen. Christopher Dodd (D-Conn) has introduced legislation to reform the financial sector in the wake of the recent economic crisis. Senator Dodd’s proposal calls for consolidating the four federal financial regulatory agencies into a single regulator. Fellow Douglas Elliott says regulation consolidation is definitely in order.

The Pension Benefit Guaranty Corporation's $22 Billion Deficit

Fri, 13 Nov 2009 00:00:00 GMT

The Pension Benefit Guaranty Corporation (PBGC), which protects the pensions of 44 million workers, announced a $22 billion deficit for fiscal year ending September 2009. Douglas Elliott analyzes the three main reasons for the PBGC’s financial troubles, and cautions that there are serious structural problems within PBGC that cannot be blamed on the financial crisis.

Dodd’s Single Banking Regulator Proposal Promising

Tue, 10 Nov 2009 00:00:00 GMT

Senate Banking Committee Chairman Christopher Dodd is introducing legislation to consolidate banking regulation into one federal agency. Doug Elliott says having one regulator for “safety and soundness” and another focused on consumer protection is promising, should help avoid regulatory arbitrage and could hopefully prevent another financial crisis.

Around the Halls: Is the Recession Over?

Thu, 29 Oct 2009 00:00:00 GMT

The nation appears to have entered a fragile state of recovery, with the worst recession since the 1930s at an end. After four straight quarters of contracting economic activity, the Commerce Department reported this morning that the economy grew in the third quarter of 2009, fueled by government spending on cars and homes. Experts from around the halls of Brookings responded to this news.

Initial Comments on the Draft House Bill on Systemic Risk and “Too Big to Fail”

Wed, 28 Oct 2009 00:00:00 GMT

As the financial system continues to stabilize, the House Financial Services Committee has drafted legislation intended to prevent future crises. The latest bill, which has been endorsed by the Obama administration, focuses on systemic risk and financial institutions that are deemed to be “too big to fail.” Douglas Elliott analyzes the 253-page bill, saying he thinks the enhanced resolution authority is essential, but he raises serious concerns about the structure of the council intended to tackle systemic risks.

Pay Limits: Not Smart

Fri, 23 Oct 2009 00:00:00 GMT

The Obama administration’s pay czar imposed limits on executive compensation for bailed-out Wall Street firms. Doug Elliott says the actions are not smart, sending the message to those employees that their pay will not be determined the same way as on the rest of Wall Street and will be considerably lower and more volatile. This risks losing the best people, since the ones that move are always those who have the best options elsewhere.

Quantifying the Effects on Lending of Increased Capital Requirements

Thu, 24 Sep 2009 00:00:00 GMT

The proposed higher capital requirements for U.S. banks being discussed at the G-20 meeting as part of the financial sector reforms is likely to have a relatively modest impact on bank lending, according to Douglas Elliott. Tougher capital requirements can powerfully aid the stability of the system without doing excessive damage to lending or the economy, he says.

Has Wall Street Learned Its Lesson?

Mon, 14 Sep 2009 00:00:00 GMT

One year after investment banking firm Lehman Brothers filed for bankruptcy protection, kicking off a week of massive shifts on Wall Street that was the beginning of the largest financial crisis in recent memory, Douglas Elliott participated in a live online chat to discuss the effect the financial crisis has had on the banking industry.

Are Bailout Investments Paying Off?

Mon, 31 Aug 2009 00:00:00 GMT

Senior Fellow Douglas Elliott talks with Kai Ryssdal about how the Treasury has made close to $4 billion from its bank bailout, and whether it's actual profit.

Is the U.S. Economy Stabilizing?

Mon, 10 Aug 2009 12:39:31 GMT

Since crashing last October, with a continuing free fall for much of the first part of 2009, the stock market has been gradually climbing back up to healthier levels. Douglas Elliott says the market rally is one sign that the economy is stabilizing – at least in the near term.

Comparing the Recessions in Germany and the United States

Mon, 10 Aug 2009 12:54:35 GMT

The world recession that began in the U.S. is hitting Germany much harder than us, due to a collapse in world trade that has damaged an economy that Germans constantly refer to as “the World Export Champion.” But, Douglas Elliott explains, Germans feel much better about their economic situation than Americans do about ours.

Restructuring the Pension Benefit Guaranty Corporation’s Board

Wed, 29 Jul 2009 00:00:00 GMT

The Senate is introducing legislation to reform the Pension Benefit Guaranty Corporation (PBGC), which currently protects the pensions of nearly 44 million American workers and retirees. The PBGC is simply too large, complex, and important to maintain its current governance system, according to Douglas Elliott. With the PGBC chronically underfunded, and a deficit that could rise to $100 billion over time, Elliott says one useful step would be to increase the effectiveness of its Board of Directors, making it more in line with other public sector corporations.

Germany’s Recession vs. America’s: Doing Worse, but Feeling Better

Tue, 28 Jul 2009 00:00:00 GMT

The global recession is damaging Germany twice as much as the nation where it started—the United States. This is due to a collapse in world trade that has hurt Germany’s economy thanks to its reliance on exports as its economic engine. Douglas Elliott is intrigued by the differing reactions between the two nations and why the German public and elites feel much better about their situation than Americans do about theirs.

Can the PBGC Ensure Pension Plans during the Bad Economy?

Tue, 28 Jul 2009 18:15:42 GMT

The Pension Benefit Guaranty Corporation ensures the retirement funds of nearly 44 million American workers and retirees, and now plans to assume responsibility for the pension plans of 70,000 GM workers. Lawmakers are concerned about PBGC's growing deficit, which has tripled to roughly $33.5 billion in six months. Douglas Elliott says they have good reason to be worried, given the current economy.

Evaluating TARP and Our Economic Outlook

Mon, 27 Jul 2009 11:10:18 GMT

Treasury’s special inspector general issued a blistering report about the $750 billion TARP program, saying it has not been transparent in managing taxpayers’ money and hasn’t required enough disclosure from firms participating in the program. Douglas Elliott says despite the report, the TARP program appears to have prevented a financial meltdown, adding that the economy is showing some small signs of improvement.

Structuring the Consumer Financial Protection Agency

Wed, 01 Jul 2009 00:00:00 GMT

The Obama administration recently released a more detailed legislative proposal for its proposed Consumer Financial Protection Agency (CFPA). Douglas Elliott believes the proposal appears to retain the intended benefit of a clear focus on consumer protection while addressing seriously the potential for destroying useful financial products. It also aims to prevent the new agency from “empire building.”

How Will the Regulatory Reforms Affect Consumers?

Thu, 18 Jun 2009 00:00:00 GMT

Dougals Elliott and others weigh in on the Obama administration's new consumer protection proposal on PBS's The Business Desk with Paul Soloman.

What Obama's Financial Regulation Reform Announcement Means

Wed, 17 Jun 2009 00:00:00 GMT

The long-awaited Obama administration plan to reform financial regulation has arrived. The good news, says Douglas Elliott, is that the specific proposals are virtually all sensible and constructive. The bad news is that there were some missed opportunities.

Reviewing the Administration’s Financial Reform Proposals

Wed, 17 Jun 2009 00:00:00 GMT

President Obama’s financial reform proposals are all sensible, necessary reforms. Unfortunately, some bolder steps have been left out due to the expectation of intense opposition from entrenched interests, says Douglas Elliott. He analyzes the administration’s plan, including parts that he believes did not go far enough.

The U.S. Financial and Economic Crisis: Where Does It Stand and Where Do We Go From Here?

Mon, 15 Jun 2009 00:00:00 GMT

The economy is showing signs that it is likely bottoming out and heading toward a weak recovery, but we need to keep our optimism—and our policy actions—in check, argue Martin Baily and Douglas Elliott. Many risks remain for both the banking system and the larger economy, and they argue for increased focus on existing financial rescue plans and the banking sector.

Do Post-Bailout Banks Need New Rules?

Tue, 09 Jun 2009 00:00:00 GMT

The Treasury Department has cleared the way for 10 big banks to start repaying $68.3 billion in taxpayer aid. The administration, however, plans to introduce new compensation guidelines that would apply to financial companies, including those that returned taxpayer money. What new federal restrictions, if any, should be imposed on the banks leaving TARP? More broadly, does this move by the Treasury Department show that its financial recovery programs are working? Douglas Elliott and other experts discuss these issues.

The Tripling of the PBGC’s Deficit: What Does it Tell Us?

Thu, 04 Jun 2009 00:00:00 GMT

The Pension Benefit Guaranty Corporation’s deficit tripled over the last six months and could top out at more than $100 billion. According to Douglas Elliott, this accelerated loss is the result of a combination of factors, including the PBGC’s inability—thanks to Congress—to charge premium rates that would cover its risk, and the investment and funding choices made by the companies that sponsor the pension plans insured by the PBGC. Is another massive bailout in store?

What Happens to the GM Pensions in Bankruptcy?

Fri, 29 May 2009 00:00:00 GMT

General Motors has filed for bankruptcy, and one of many questions is what will happen to its pension promises, which are underfunded by $20 billion. Douglas Elliott says GM is very likely to continue to shoulder the full obligations after restructuring, rather than passing them to the Pension Benefit Guaranty Corporation and taxpayers—for now.

A Guide to the Pension Benefit Guaranty Corporation

Wed, 20 May 2009 00:00:00 GMT

As Chrysler and GM face bankruptcy proceedings and restructuring, the Senate held a hearing on whether the Pension Benefit Guaranty Corporation (PBGC) has the capacity to insure the pensions of nearly 44 million Americans who work or have worked at those firms. Douglas Elliott explores the particulars of the PBGC, the precarious situation that the automotive industry finds itself in, and offers 14 possible solutions to the problems that plague the government’s pension program.

Bank Stress Test Results

Tue, 12 May 2009 00:00:00 GMT

All in all, the stress tests were useful and the results were encouraging, says Douglas Elliott. However, we have a lot of pain to get through before this crisis is over. If we're lucky, he says, it will remain bad for awhile. If we're unlucky, it could still get extremely ugly.

Implications of the Bank Stress Tests

Mon, 11 May 2009 00:00:00 GMT

Although there was good news from the Fed’s recent “stress tests” on the 19 largest banks, it is important to not take excessive comfort from what remains essentially a highly educated guess as to the future of the banks in a very uncertain environment, says Douglas Elliott. While we may well have turned the corner, we can be far from certain that the solvency crisis in banking is over.

Stress Test Loan Losses and Profit Expectations: A Comparison

Fri, 08 May 2009 00:00:00 GMT

Doug Elliott analyzes the banking regulator’s stress test results by comparing them with other detailed analyses of the financial state and prospects of the banks, finding that the government's assumptions are more conservative than the IMF's, but less than the pessimists'. But he notes the real stress test will be comfortably surviving 2009 and 2010.

Interpreting the Bank Stress Tests

Mon, 04 May 2009 00:00:00 GMT

The Obama administration has released the long-awaited results of the bank stress tests, saying some have enough capital to weather the recession, while others receive a regulatory blessing. Douglas Elliott says there is some good news, but not to overinterpret until we know the tests’ rigor. The real stress test will be making it through 2009 and 2010 without losing too much money.

Bank Nationalization: A Survival Manual

Tue, 21 Apr 2009 00:00:00 GMT

Several prominent economists continue to push for the government to nationalize the nation’s weakest banks before they bleed the Treasury and taxpayers dry. Douglas Elliott says nationalization is risky and costly and therefore should be the last resort, but policymakers need to be ready in case it is needed. He writes a 15-step “survival manual” with suggestions for minimizing the damage from nationalization, especially the costs to taxpayers.

Pre-emptive Bank Nationalization Would Present Thorny Problems

Wed, 25 Mar 2009 00:00:00 GMT

A number of prominent observers continue to call for a swift nationalization of the nation’s weakest banks. Douglas Elliott argues that while nationalization would provide an appealing emotional catharsis and has some advantages, the harm would be greater. Nationalization would be costly, difficult and risky. Elliott walks through the initial step of taking over a major banking group and demonstrates the problems that lie therein.

The Public-Private Investment Program: An Assessment

Mon, 23 Mar 2009 00:00:00 GMT

Treasury Secretary Timothy Geithner’s plan announced on Monday to move some $1 trillion in toxic assets off of the balance sheets of the banks helps remove the uncertainty from the financial system although it will not fix the credit crisis on its own, according to Douglas Elliott. Strong concerns remain about whether the Public Private Investment Program (PPIP) will succeed—the program could either fizzle or prove to be too expensive for the taxpayer—but there are also some grounds for hope.

What Will It Take to Stabilize the Banks?

Tue, 17 Mar 2009 00:00:00 GMT

In this article Martin Baily and Douglas Elliott discuss what it will take to stabilize the banks. They call for an adequate amount of capital to be injected into the banks and for the troubled assets be moved out of the banks or their impact neutralized. They agree that both of these actions will be very expensive for the taxpayers, involving significant risk of large future losses, but warn that the costs of stabilizing the banks will be very large indeed, and the sooner policymakers face up to that, the better.

Bank Capital and the Stress Tests

Tue, 03 Mar 2009 00:00:00 GMT

The administration’s new “stress tests” for the 19 largest banks will likely result in substantial new infusions of government money to bolster their capital. Douglas Elliott explains what “capital” is; how to measure whether a bank has enough of it; and what the stress test and capital proposals are. He applauds these actions as “right on virtually all counts.”

Bank Nationalization: What Is It? Should We Do It?

Wed, 25 Feb 2009 00:00:00 GMT

Bank nationalization—the topic du jour in Washington and on Wall Street—means different things to different people. Although nationalization is a serious and extreme step with high social and financial costs, Douglas Elliott believes full nationalization may be needed only as a last resort for one or two of the nation’s larger banks, with more widespread nationalization unlikely. But, he says, it may make sense for the government to partially nationalize additional large banks now, in an effort to bring some certainty to the markets.

Bank Toxic Assets: What Role for the Taxpayer?

Fri, 20 Feb 2009 00:00:00 GMT

Critical decisions need to be made soon on the administration’s plan to create a public/private partnership to buy “toxic assets” from banks, including what the proper financial role of the taxpayer should be. Douglas Elliott argues that practical imperatives will push the government principally into the role of providing cheap financing and issuing guarantees of floor values for the securities, with little emphasis on buying assets directly as a co-investor. He believes the public should take the guarantor role, because it minimizes the potential downside for the taxpayer, although he acknowledges this is a subjective call based on tolerance for risk.

Geithner’s Multitrillion Dollar Bailout

Wed, 11 Feb 2009 00:00:00 GMT

Treasury Secretary Timothy Geithner’s $2.5 trillion bailout plan would create a public-private fund to buy up hard-to-sell assets from banks, inject more capital into banks and use Treasury and Fed money to finance up to $1 trillion in assets backed by consumer, auto and small business loans. Is this plan sufficient? Will it stabilize the financial system? Doug Elliott and other experts discuss these questions in a op-ed piece in the New York Times.

The Administration’s New Financial Rescue Plan

Tue, 10 Feb 2009 00:00:00 GMT

Doug Elliott critiques the Obama administration’s new rescue plan for the banking sector announced on February 10, saying he agrees on the need for significant new capital injections, despite their political unpopularity, but argues that it is not at all clear that the proposed “bad bank” could be designed in a way that would make it better than simply guaranteeing toxic assets on the books of the banks. Elliott writes that the devil will indeed be in the details of the construction of the bad bank and the pricing mechanisms.

TARP and the Financial Industry

Fri, 06 Feb 2009 13:20:50 GMT

As President Obama and Congress continue to consider how to jumpstart the economy, Fellow Douglas Elliott says that the plan must include dealing with the financial industry overall, its toxic assets as well as policies that work for consumers and businesses alike.

“Bad Bank”, “Nationalization”, “Guaranteeing Toxic Assets”: Choosing Among the Options

Thu, 29 Jan 2009 00:00:00 GMT

The new administration and Congress soon will be debating how to spend the TARP’s second $350 billion—and possibly even more—to stabilize the financial system. Douglas J. Elliott explains three approaches: establishing a “bad bank”; guaranteeing toxic assets; and nationalizing one or more banks, and recommends the “least bad option”—a combination of toxic asset guarantees and a mild form of nationalization.

Measuring the Cost of the TARP

Fri, 23 Jan 2009 00:00:00 GMT

The Treasury’s Troubled Asset Relief Program (TARP) has been widely described as a “$700 billion bailout” but Douglas Elliott points out that it will cost a lot less in reality. A recent CBO report suggests the actual cost may only be a quarter of the amount committed. We must use accurate cost estimates, using methods like CBO’s, to make the best decisions about the commitment to save our financial system, which programs are funded, and how we execute the rescues.