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The New York Times editorial page on the day following the passage of the second bailout or rescue plan of $700 billion in the Senate after it was voted down in the House of Representatives. It points out that the bailout bill does little to prevent a wave of foreclosures which the NYT estimates at six million people expected to default in the rest of this year and 2009. It faults lenders unwillingness to reduce the loan balances amount. At a Congressional hearing for the Hope for Homeowners program in which the governmet wold insure upto $300 bilonin new affordable loans for troubled borrowers if the lenders voluntarily refinance delinquent mortgages by reducing loan balances to 90% of the homes' current market value, lending banks were lukewarm about taking these losses in exchange for bigger losses in foreclosures. These lenders include Wels Fargo, Chase, Bank of America and Citigroup. The FDIC's Sheila Barr has also advocated reducing loan balances in her proposal for tackling the housing crisis presented after the Bear Stearns crisis. She is taking this approach to banks that like IndyMac were taken over by FDIC. But the numbers are not large letters were sent to 28,000 delinquent borrowers of IndyMac recently to reduce loan balances. This is a serious problem and either Congress and Treasury are leaving this problem to the next administration taking office 3 months from now as there is no real consensus on this issue even today or they are missing the impact this has in dropping home price values even further in neigborhoods across the nation as foreclosures drive prices down even further compounding the problem. For the financial institutions it would appear that they are letting this drag out because their capital is at frighteningly low levels and taking losses at one time is harder than taking the foreclosure losses dragged out over 1-3 years and they are also looking for a way in which they can let the government bear the burden of losses as the crisis intensifies which can make sense from the point of view of each institution. According to a report in the Wall Street Journal on September 29, 2008, Sheila Barr told Congress this month that in recent years troubled loan portfolios have yielded about 32% of book value, compared with more than 87% for loans in which the borrower is current. These are strong statistics in favor of lenders taking an informed decision to lower loan balances voluntarily with some government help along the way but the fact that this is not happening leads one to think that something is falling between the cracks, initial lender reluctance to take losses through voluntary balance reduction at the time of Bear Stearns crisis given taxpayer reluctance and lack of government initiative to help lenders in doing this, sort of what Martin Feldstein suggested in a series of articles during the time before and after the Bear Steans crisis. And then as the credit crisis worsened with collapse of Lehman, WaMu, Freddie, Fannie and Wachovia in September 2008 fear gripping the markets and LIBOR interbank lending rate at close to 8%, banks gripped by the fear prevailing in the market, frozen practically about any steps other than preserving their hammered capital, and reluctant to take losses which would further impair their capital. Also in the WSJ Sept 8, on help for homeowners, Deutsche Bank estimates 40% of homeowners or about 20 million households will owe more than their home is worth by the time the housing market stabilizes. This will lead to some homeowners making the rational decision as Martin Feldstein argued to walk away from their homes, leading to more foreclosure losses for th banks. This article Rescue Includes Steps to Help Borrowers Keep Homes by Ruth Simon also has some information that confirms the NYT editorial. An analysis it says of 144 mortgage modifications by the Massachusetts Attorney General's office found that none reduced mortgage balances and onoly a handful reduced monthly payments. Even with interest rate reductions, the study showed borrrowers wound up paying more because of missed paymmets penalties and fees. Another study by Credit Suisse mentioned in the same article points out that the percentage of borrowers who were behind 6 months after loan modifications dropped to 17% when lenders reduced the loan balances and 13% when mortgage companies froze the interest rate of adjustable rate mortgages. A bigger problem is the effect on consumption, if 40% of homeowners end up owing more to the bank than their home is worth as Deutsche Bank estimates, combined with higher unemployment and higher parttime employment, by the time things stabilize. And this is the big looming problem for a new administration in January even if the bailout plan passes Congress this week after revisions and eases the crisis in the credit markets. ...

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Can Beijing walk the talk on free trade and protectionism. Giving contracts in the $585 billion stimulus like the 3G infrastructure contracts on an open competitive basis and not favoring home firms, allowing acquisitions like Coca Cola's acquisition of China Huiyuan Juice Group to proceed, and moving on the yuan currency issues with free trade in mind and not concentrating on an export push.

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Efforts to revive the Chinese Communist party, and facilitate the evolution of a new economic--political model that helps control corruption. Efforts also to get the involvement of non-governmental organizations from society. The city of Shenzen, near Hong Kong, is being used as the model. It was here that the current economic-political model was first established, through the Shenzen Special Economc Zone.

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Tyler Cowan writes about the problems of crony capitalism and lack of opportunities in American capitalism as it is practiced today.

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Most Americans pay less in taxes, including state, local and federal taxes, today than in 1980 in inflation adjusted dollars. The taxes have gone down by 2-3% for incomes in the range of $50,000 to $150,000, and gone down by 3-4% for incomes between $150,000 and $350,000. Taxes have gone down over 7% for incomes above $350,000. The main reason is the decline in federal income taxes.Tax rates increased in the period to 1990 and declined from 1990 to 2010. The Democratic party and president Obama are pushing for increase in taxes for incomes above $250,000. Republicans are resisting the changes citing disincentives to investment and growth for small business which generates a large proportion of new jobs created in the U.S. economy. The New York Times study shows the percent of the U.S. population that makes between $200,000 and $350,000 almost doubling in the period 1980-2010 and at the same time its share of the U.S. income remaining the same - many small business owners who hire employees would fall into this income category. Republican's response is for tax reforms that reduce loopholes, deductions and other tax expeditures that disproportionately help the wealthy. Democrats say this cannot create enough revenues to address the deficit, when mortgage deductions, charitable deductions are excluded. The back and forth is leading to stalemate but also opening up discussion for the first time on whether the mortgage and charitable deductions make sense in today's environment. A significant portion of revenues lost in the mortgage deduction goes to affluent households, subsidizing larger borrowings to build larger homes than otherwise, according to the Brookings Institution. Politicians have resisted changes that would go against powerful lobyying groups in the past, yet the impasse has opened up new thinking outside the box because of the pressing need to come up with a solution....

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The average of vehicles on the road reached a record of 11.1 years in 2011, according to R.L. Polk research company. Using the average of 15,000 miles driven a year used by the EPA for cost calculation on fuel economy labels, shows that car are being driven for much longer nowadays, over 150,000 miles. In the 1960's and 1970's the average was closer to 100,000 miles. Because of the EPA mandated fuel emissions standards and technological advances the newer cars in 2012 have better life than the older cars in the 1970's. Toyota's, Honda's and Volvo's frequently get 150,000 or 200,000 miles and still have some usage left for example. In addition the tighter fuel efficiency standards of the Obama administration and technological advances now underway are likely to bring a new generation of cars that provide another level of improved performance.

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India's lower house of parliament passes a Food Security bill which provides subsidized rice, wheat and other grains to the poorer sections of society, covering about 75% of people living in the rural areas and 50% of the people in cities. The legislation increases the cost of food subsidies by $4 billion to $20 billion a year. Because of high levels of malnutrition in rural areas in India, especially among children, the program helps the needy. Brazil's Bolsa Familia program is more far reaching in helping the poor because it also requires vaccinations of children and making sure children attend school.

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Vladimir Putin presents his views on democracy in Russia, on prevalent corruption, and ways to introduce democratic processes through internet referendums on legislative initiatives, the election of governors and local officials. He says democracy cannot be built overnight, that sovereignty of the people of Russia is the true basis of democracy and this was achieved through the fight with the oligrachy and anarchy of the 1990's. Rights that Russians want to see democracy ensure are: right to work, free medical care and education for children. In addition with the development of civil society and the advance of the middle class in Russia democratic processes have to keep pace. But he doesn't see democratic processes working with what he calls " a circus of candidates making unrealistic promises" with "spin doctors and image makers controlling politicians." And he does not see modern democracy limited to casting votes, and calls for internet based democracy and referendum based democracy to be integrated into the overall development of institutions, particularly at municipal and regional levels. He calls for a change in the mindset of Russians away from corruption in public service, saying that as long as the mindset is there one set of thieves are unmasked only to be replaced by another set of thieves. And cites polls that show teenagers aspire to be public servants because of the easy money to be made in public service. To correct this he proposes salaries that are high enough and at the same time have absolute transparency, declaration of expenses and family purchases, residences, vacations etc. Other steps include separating executive power and property and separating executive power from the system of checks over it....

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At a time when ideas are held with passionate conviction, Andy Kohut kept a remarkable self-discipline in phrasing his questions for polls so as to hear clearly what people were thinking. He followed and loved a robust debate and saw his job as presenting the facts. The Pew Research Center's credibility has been enhanced by Andy Kohut's leadership. He led the Gallup polling organization for many years before becoming founding director of the Pew Research Center. At a time when more than ever we need to hear what is on people's minds, and provide a glimpse of this that goes beyond the passion and political spin in the news story, the work of Kohut is sorely missed.

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The Obama administration's $38.6 billon loan program using Stimulus funds was intended to create 65,000 jobs. Two years into this program, with half the money disbursed, the program has created a mere 3,545 new permanent jobs according to Energy Department figures. The Energy Department claims its $5.9 billion loan guarantees to Ford Motor Company to produce energy efficient vehicles by upgrading plants in 5 states saved 33,000 jobs. Brookings Institution analyst, Mark Muro, says the administration appears to be counting all the workers at these plants and not the jobs saved. 33,000 is close to half the Ford hourly and salaried U.S. employees. Harvard Business School professor, Josh Lerner, says there is a tendency to do a lot of fuzzy math in these figures. Muro points to the need to set large expectations for short term political calculations. The Energy Department's own figures show 20 "green tech"companies won loans so far under this project by negotiating with the Energy Department. If these companies hire the people they agreed to they would hire 8,050 new permanent workers. Only 10 of these companies have created or saved jobs so far. Of the other 10 some won loan approval only recently. The whole process is time consuming. Even if the Energy Department were to create the 60,000 jobs under the revised estimate, each job saved or created would come at a cost of 640,000 dollars in loan guarantees. Using the figure of $19.3 billion disbursed 2 years into this program (half of the $38.6 billion) and 8,050 jobs created, would give a cost of $2.4 million in loan guarantees for each job created- an astoundingly high figure. Other factors to consider are the additional jobs created downstream by suppliers to these companies as the administration states, and the cost of loans if as in the case of Solyndra a company goes bankrupt. Solyndra received a loan of over $500 million and represents 3% of loan guarantees. The administration and Congress assumed a failure rate of 5-10% for this program. ...

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About 60% of the population in Guinea, Sierra Leone, and Liberia, countries worst affected by the Ebola virus are facing food shortages. Markets are closed in these countries reducing access to food. The virus is affecting West Africa in other ways. Ample food supplies with lower prices of corn, wheat and rice on world markets, as a result of supplies from Brazil, India and Thailand, is not reaching Africa because of restricted access because of Ebola. Clogged ports, and conflicts adding to this reduced access. In East Africa the FAO estimates 20 millon people face food shortages up from 15 million estimate earlier. The rise in value of the dollar in relation to African currencies is increasing prices of food. Food price inflation is leading to a situation where an household with many children in a relatively better off country like Uganda being able to afford only one meal a day. The result will be increase in malnutrition in Africa if solutions are not found to get access to large food supplies outside Africa with lower prices. ...