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Feldstein emphasizes the need to help homeowners with a plan he suggested back in June.. And suggests spending by the government to build infrastructure, other spending initiatives to stimulate demand, and rebuilding military capacity. Spending he suggests should be large enough to make an impact, as the loss of household wealth from falling home and stock prices could result in a loss in aggregate spending of $300 billion or more. He points to the need for urgent action.

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Chief Justice Roberts and President Obama both excelled at Harvard Law School, one as managing editor of the Law Review and the other as President of the Law Review. One raised in suburban Indiana, and going to small Catholic boarding school started 5 years earlier by Chicago and Indiana businessmen like his father, a steel company executive. The other fatherless trying to construct his own identity at a school in Hawaii founded in 1841 to educate the children of white missionaries. Roberts adminstered the oath of office to Obama in January 2009.

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Coral Davenport of the NYT provides some of the basics of the Paris climate change agreement. This includes an effort to cut greenhouse gas emissions by half to avoid a situation in which atmospheric temperatures rise by 2 degrees Celsius or 3.6 degree Fahrenheit.  The earlier effort to negotiate an accord failed in 2009 in Copenhagen. This time all 186 countries were asked to signup with the USA and China, the No. 1 and No. 2 polluters and India leading the way. Germany is well on its way to self sufficiency through development of solar and wind energy with the German government leading the way, and France leads in the use of nuclear energy. How did this happen now? As Davenport points out there are scientific studies. But this is not the primary reason China is shifting.Davenport fails to emphasize the health concerns and pollution concerns that motivated China to shift away from coal. China's industrial revolution of the last 3 decades has come at a huge cost in pollution of air and water, and president Xi Jinping has decided to make the shift away from coal a top priority. It is estimated that mortality rates for areas of high coal use north of the Yangzte river have higher mortality rates than areas of lower use of coal south of the Yangzte river. The other big polluter India is shifting because it is learning from China's experience. Davenport mentions the resistance to the scientific evidence in the Republican party. As a result it is already clear that it lacks support in Congress and under a future Republican administration. In a fashion similar to healthcare, president Obama failed to create a consensus before proceeding in the hope that this would be better than waiting. However American industry is already moving away from coal as documented in Links- "The Trump executive order on coal and the continuing shift to natural gas." Utilities in the U.S. are making the shift away from coal because of the economics and planning ahead as governments can change every four years. ...

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It is hard to imagine that one is even writing about this, as shocking as it is- the 4 or 5 minutes between a decision to launch nuclear weapons and the end of life on this planet earth as we know it. Here Sam Nunn, a U.S. senator who was part of the negotiations for arms control and who is the leading American in this field talks about the unimaginable danger. He says the strategy from the Cold War where Russia and the U.S. put their nuclear forces in a position to be launched within minutes, 4 to 5 minutes, is outdated and needs to be changed. Hillary Clinton described the issue in the television debate. Yet this was not discussed because of the nature of the 2016 presidential election with lack of serious discussion.  And both Nunn and Clinton emphasize that once the missiles are in the air they cannot be ordered to go back. Accidental error, judgemental error, informational error in which one side thinks the other has launched a missile, a firing by mistake, are possible. In this situation Nunn says Trump is temperamentally unfit, and Clinton is fit to take on the responsibility. Yet the question this raises is as Nunn signals- is anyone but God fit to make this decision to launch nuclear weapons. Nunn says it is outdated and wrong to have only a few minutes, as such a decision cannot be made in a few hours or days, much less in 5 minutes. Nunn brings up a discussion he had in Moscow when he brought this up with Russians and president Putin. Russian president Putin told Nunn that he was fully aware of this. Putin's response was- "Senator Nunn, at some point it becomes automatic."  Nunn does not clarify what this means, or what Putin means to say. For people on the planet it is not enough to have Reagan, Gorbachev, Clinton, as Nunn mentions being responsible people for a nuclear decision. The current state of affairs is simply shocking and the lack of attention to this is also shocking. Equally dangerous is that 20 countries have weapons usable nuclear material, and sophisticated hacking of command and control processes is another danger.       ...

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David Brooks on the candidacy for U.S. President of Senator Rick Santorum. He says Santorum genuinely represents the working class- a grandson of a coal miner and the son of Italian immigrants who has represented workers of the steel manufacturing region of western Pennsylvania. Santorum has pushed hard in this campaign largely ignored by the media. He has visited 370 towns riding in a pickup truck trying to cover as much ground as possible and talking with great conviction about his positions distant from the corporate and financial wings of the Republican party, about family, and communities. Bring someone like Sherrod Brown of Ohio together with someone like Rick Santorum and you have good representation of the working class across the political spectrum to win this election for the working class of America, says Brooks, who sees this as a lot better alternative today than Harvard Law.

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A 93 year old hero of the French Resistance, Stephane Hessel, publishes a pamphlet called "Indignez-Vous!," released by a small publishing house from the publisher's home. He calls for resisting the "international dictatorship of the financial markets" and "defending the values of modern democracy." He protests France's treatment of illegal immigrants, the influence on the media by the affluent, cuts to the social safety net, French educational reforms. It was first published in October, and now has sold 1.5 million copies, all through word of mouth advertising. It has been translated into Spanish, Italian, Portuguese, and Greek. New editions are planned for Slovenian, Korean, Japanese, Swedish and other languages. In Britain, it was published with the title "Time for Outrage." The pamphlet is about 4000 words and only 14 pages of text. Its timing is good, as the French are debating what to do in their politics with an election approaching and Sarkozy's standing at new lows. The short length and low price are a big plus, at $4 it made a convenient Christmas gift. Britain, Spain, Portugal and Greece are going through austerity cuts. Public sentiment has been aroused by the cuts, and by the overarching influence of financial markets on the economies of these countries. Some of these countries referred derisively as piigs- Portugal, Ireland, Greece, Spain -countries in the financial markets. The economic impact has fallen disproportionately on the young, with high jobless rate for young people from Italy to Spain, and cuts in funding for universities and schools in the UK also fall heavily on young people. A sense that something has gone wrong in the free market system and the western world. Austerity cuts in spending in the U.S. create a similiar feeling and joblessness among young people is also high in the U.S....

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A new bipartisan plan on comprehensive immigration reform with support from Senators Graham, McCain, Schumer, sets forth principles for legislation. This includes Democratic requirements for a pathway to citizenship for 11 million illegal immigrants and Republican requirements for stronger enforcement. A separate bill sponsored by Senator Orrin Hatch would expand the H1-B program for skilled immigrants and increase the number of green cards. Senator McCain said on a television news show: "We can't go on forever with 11 million people living in this country in the shadows in an illegal status."

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Subprime also includes high rate loans that higher income borrowers used between 2004 and 2006 to buy homes that had inflated prices. And these loans were heavily marketed by mortgage lenders and in the later stages of the boom by thrifts and banks who got into the act also. As a result every corner of the country and every income bracket borrowers have been caught up in the high rate borrowing most were overstretching themselves to meet the higher prices of homes as prices went up. This is the finding of a research done by the WSJ of 130 million home loans in the past decade with particular focus on the period 2004- 2006 when the worst aspects of this bubble were taking place. Note that about $600 billion in adjustable rate loans will adjust by the end of 2008. And a total of 1.5 trillion dollars of high rate loans were made in 2004-2006 so more ogf these high rate loans will adjust in 2009. Places like Las Vegas, Nevada, Stockton, California, and Fort Myers, Florida and these states may be the hardest hit but the problem is spread nationwide is what the Journal's research suggests and is also not limited to poorer borrowers. ...

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The House bill just passed will only help 500,000 homeowners avoid foreclosure, when foreclosures this year are expected to be more than 2.4 million and much higher next year, as its estimated that 9 million homeowners have negative equity in their homes already. It doesn't do enough to prevent a downward spiral in house prices that will be difficult to control once it picks up speed. So while Congress is only doing too little, Bush administration is doing nothing. Here a NYT editorial points to Mr Bush's worthy efforts as having negligible impact. Hope Now after 5 months has barely dented the problem, Project Lifeline hasn't produced results, and FHA Secure has helped fewer than 2000 homeowners facing foreclosure. This is a shame because Mr Bush has praised FHA Secure. Doubts expressed that Mr Bush is sincere about his intentions or efforts, that the Republican's free market biases may be behind this, that bold action would not let the market offer a necessary correction in their view. Also possible is that like the Council of Economic Advisors chairman Lazear, Bush feels optimistic that the economic situation is not as bad as its made out to be and will respond to the stimulus package of government checks....

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Governor Pawlenty of Minnesota will be in a quandary if he vetoes the Minnesota Subprime Borrower Relief Act because he will be described as insensitive if chosen as McCain's running mate. Essentially this bill helps needy borrowers. Minnesota according to a research group Housing Link will see a 39% increase in foreclosures in 208 and is described by some homebuilders as F- in its rating for conditions in the housing market.

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A lot of the same subprime lenders who had questionable ethical practices and in many cases defrauded homeowners are back in business as FHA guaranteed lenders. The FHA gets to pick up the tab for faulty lending by these brokers and companies. Inside Mortgage Finance, a research newsletter, estimates that over the next 5 years fresh FHA loans that go sour will cost thaxpayers $100 billion more. Risk Mitigation Group, a consultancy, says over the next 12-18 months there is going to be a FHA Insurance Armageddon. Founded in the New Deal years the FHA is supposed to promote first time home purchases by allowing small down payments, as little as 3%, and lenient standards on borrower income , as long as mortgage and related expenses do not exceed 31% of household earnings. Buyers pay a modest fee for the taxpayer backed insurance. Lenders and brokers can get a license to participate in FHA programs by showing industry experience and knowledge of agency rules. BUt experts say the FHA does not have the staff to deal with its expanded responsibilities under the new Bush programs like HOPE for homeowners, and does not have the IT systems to show if the brokers had violations and convictions in the past in their records. Overburdened, lacking the computer systems to track brokers records, and understaffed, the FHA has licensed some of the same brokers who caused the subprime disaster as they applied under different names and as different companies. After the subprime market evaporated in 2007 FHA loans are all thats available for many borrowers. In fact by fall 2008 FHA loans accounted for 26% of all new mortgages issued nationwide, up from only 4% a year earlier. The Bush administration and FHA extended $300 billion in loan guarantees to HOPE. And these brokers who defraud investors with deceptive practices are known to put down even disabled people as employed, and show incomes that are not verified. Once these loans are sold as securities these brokers engaged in deceptive practives have collected their fees and being FHA guaranteed they hold their value as securities, except that the losses as they default are the taxpayers responsibility. This is the $100 billion in losses that Inside Mortgage Finance is warning about. Along the way it leaves a trail of trouble for homeowners, state agencies trying to stem these practices, and taxpayers. ...

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Glen Hubbard, who was Chairman of the Council of Economic Advisors under President George W. Bush and is now Dean of Columbia University Business School, Hal Scott professor of International Fiancial Systems at Harvard Law School, and Luigi Zingales professor of finance at the University of Chicago Booth School of Business, say a different plan of action is needed from what the Obama administration is doing to tackle the banking crisis. They are really skeptical about the the Public Private Investment Program and other plans put forth upto now for several reasons. First, in every case they say there is a lot of carrot but very little stick, and this won't work. TARP program was mostly carrot, with Treasury getting back securities worth $78 billion less than the $254 billion invested, as pointed out by the Congressional Oversight Panel.The FDIC's guarantee of short term debt was worth $100 billion just for the original nine TARP participating banks, and the mortgage related asset guarantees offered Citibank and Bank of America were worth tens of billions. They see anew round of TARP injections with the conversion of the government's preferred stock into equity after release of the stress test results. Then there is PPIP the Public Private Investment Program, and its plans to subsidize the purchase of bank's"toxic assets" by hedge funds and other investors. They estimate the government will spend $2 for every $1 the private sector puts up. And even with this subsidy their thinking is that the probability of succes is low for the same reason that has prevailed since the earlier efforts by Treasury Secretary Paulson- there is just too big a gap between the bid and ask prices on the toxic assets, and add to that the reluctance of investors to partner with the government. Its time for more stick say these experts as the problem of toxic assets, and of credit and lending in the economy, will hang like a large shadow over the economy, as long as these tough problems are not wrestled with. This is the Hubbard-Scott-Luigi Plan: 1) The FDIC should announce that its guarantees of short term debt set to expire in October will not be renewed. Insolvent banks, defined not by stress tests but as those that cannot fund themselves in the private market, will be taken over by the FDIC under aclear and credible action plan. 2) The FDIC lacks the resources to run several large and complex banks which may become insolvent. And waving the idea of nationalization the creditors may try to get the government to bail them out. The authors of this plan say the FDIC should solit each bank into a "bad bank" and a "good bank." The "bad bank" would carry all the residential and commercial real estate loans and securitized mortgages as assets, and all the long term debt as liabilities. THe "bad bank" would obtain along term laon from the good bank to fund the assets of the bad bank. Al the remaining assets including the derivative contracts and the loan to the bad bank would be assets of the good bank. It would also have all the insured deposits and the FDIC guaranteed short term debt as liabilities. With the split accomplished the good bank can be released from FDIC receivership. 3) The long term debt holders would be compensated by receiving all the equity of the good bank. The old shareholders would get the equity in the bad bank. And in any restructuring bondholders should do better than equity holders. If banks are not really insolvent as some say and just facing temporary dislocations, then the bad bank will eventually surge in value, and the equity holders will do alright, and if not they will receive nothing as they should. 4) For this to work legislation needs to take effect before October for FDIC procedures for handling failed banks to be also applicable to bank holding companies. And this new legislation puts no new cost on the taxpayer....