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Jon Hilsenrath of WSJ provides an illuminating account of how Daniel Tarullo as head of the Large Institution Supervision Coordination Committee has changed the way bank supervision and rules are set for U.S. banks since the days of the 2008 financial crisis. Tarullo started the effort under Ben Bernanke and continues this in 2014-2015 under Fed chairwoman Janet Yellen. The New York Fed is seen as ineffective in bank supervision and the supervisory role is now entirely performed under the leadership of Tarullo, assisted by Kenneth Gibson and Timothy Clark. The trio are some of the great unsung heroes of the effort to put the U.S. financial system and the economy on a safer footing.

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ECB president Mario Draghi tells a newsconference on April 14, 2015, that the bond buying program is "proceeding smoothly." He said that he does not see scarcity in the bond market. The ECB plans to continue its purchases of government bonds and other debt at a rate of 60 billion euros a month through September 2016. He said the program of very low interest rates for a very long time "is fertile terrain for financial instability imbalances," but he did not see evidence of systemically large financial imbalances at this time. The ECB approach would be to tackle the risks by using its power as a bank regulator, not by changing monetary policy, said Draghi. He was optimistic about the initial results, saying "more accomodative monetary policy is being translated into better credit conditions, which is something we have not seen before." The euro is down to $1.06 and low oil prices have helped improve economic conditions, as well as ongoing structural reforms pushed by the EU and ECB. Draghi's forecast for economic growth in the eurozone is now up from 1% to 1.5% for 2015....

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Wages remain stagnant, labor participation rate declines, and U-6 at 11.8%, as unemployment rate declines to 5.9% in U.S. labor market.

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The unemployment rate drops to 6.3% in April 2014, as a significant number of Americans stop looking for jobs they cannot find. 288,000 new jobs were created in April 2014, according to the Labor Department. Yet the participation rate has declined to 62.8%, the lowest in three decades, and wages are up only about 1.9% from the prior year month. The unemployment rate which counts involuntary part-time workers and workers discouraged and not looking for a job was 12.3% for April 2014.

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Raghuram Rajan, Professor of Finance at the Graduate School of Business, University of Chicago, was appointed chief economist at the IMF in 2003. He presented a paper, titled "Has Financial Development Made the World Riskier," at the annual Jackson Hole meeting of economists and central bankers for 2005. Rajan says he had planned to write about how financial developments during Greenspan's 18 year old tenure had made things safer, but the more he looked the more evidence came up that the risk reward relationships in a normal functioning financial market had been terribly distorted. Market participants were being rewarded for wins but were not being asked to take on commensurate risks and impacts on their bonuses and rewards. He also cautioned about the use of credit default swaps which acted as insurance against bond defaults, and said insurers were generating big returns on this but with the appearance of little risk- even though the pain could be immense in a default. Banks were carrying credit securties on their books that posed risks to the whole financial system if things went wrong with the credit securities. Reaction from the gathering was unfavorable. Lawrence Summers, a former Treasury Secretary said, "the basic, slightly lead eyed premise of the paper was misguided."...

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NYT exhortation for Congress to resist the lobbying pressures of the banks to weaken regulation for a Consumer Protection Agency and derivatives trading on exchanges. The first by amending legislation for a Consumer Protection Agency so that no states can pass tougher consumer protection laws, something that prevented states from protecting consumers from abuses in the mortgage business. The second to propose legislation for derivatives trading that allows corporations and hedge funds to trade derivatives privately. NYT editorial says Congress should require all derivatives dealers and users -banks, hedge funds and corporations- conduct their trades on exchanges where they are reglulations and public scrutiny. NYT responds to the banks and corporations that say this would raise their transaction costs to hedge any given risk, by saying that this is debatable. Greater transparency should reduce costs but even if there were some higher costs it would be outweighed by the larger benefits to the banks themselves and the country through the lower systemwide risks. ...

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This editorial in the Wshington Post is sharply critical of the Obama administration's policies of inaction in Syria and Iraq. It says president Obama and his administration will have to answer for the policies to the American people and the people of the Middle East and Europe.

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This was one of the last reports written by Anthony Shadid, New York Times foreign correspondent, before his death in Syria. It covers the Islamist movement's shift to modernism and incorporating an outlook that includes ideas of liberal democracy from Britain, as seen from Tunisia. No longer is the main source of ideas coming from Egypt. A diverse group of thought is being developed in Arab and North Africa, and in places like London, where emigres from the Middle East during the years of repression gathered to discuss ideas for the future. Said Ferjani's as one of these emigres is one of sources of the new thinking and approaches of Islamist thought.

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The May 6 episode of the stock market plunge of 900 points in the U.S. and then recovering had the effect of rattling investors nerves especially retirees. The impact of this episode is recorded in the experience of one Charles Schwab broker office in Englewood, Colorado. By the end of that day this broker had 50 calls on his answering machine from a fifth of his clients, all seeking to know what happened. Charles Schwab, who helped launch a period of individual investing in the U.S. after 1982 by cutting fees and going after the average investor, (along with others like Jack Bogle of Vanguard Funds), is also on edge. He says he has not seen anything like this since his early days. Schwab confirms Yale Prof. Shiller who says (see link) that his index for markets shows a lot of nervousness. Saying that 98% of people are still very concerned, coming after the May 6 incident, and the Greece and eurozone crisis that impacted US stock markets. One other factor he points out is the constant flow of headlines that suggest certain business people engaged in fradulent practices, something that fuels a lack of trust. Charles Schwab ponders from his office across the San Francisco Bay Bridge, whether words like safety and soundness mean anything anymore. Another factor of concern, Bogle points out, is that institutional investors now own 70% of American corporations, up from 35% in 1975. And the advantage has veered sharply in their direction as institutions, hedge funds, and investment banks trade on their own account, with wealth moving in that direction. This leaves the individual investor and especially the retiree or those about to retire in a severe predicament....

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The ruble goes from a low of 80 to the dollar in Dec. 2014 to 50 to the dollar by May 2015. The euro also strengthens against the dollar with weakening economic conditions in the U.S. leading to a reversal in the strength of the dollar.

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Nour Malas and Joe Parkinson report from the town of Makhmour, retaken by Kurdish Peshmerga forces following airstrikes on ISIS militant positions. The crisis situation 20 miles from Erbil, capital of the Iraqi Kurdistan region and the coordination between Iranian advisors, U.S. military advisors, and the Peshmerga to push back the ISIS. Peshmerga say young Sunnis in the town joined the ISIS in droves, something never seen before. It also reveals the situation after the failure of the Maliki administration to build a state with support from all parts of the Iraqi population- Shiite, Sunni, Kurds and tribes- leading to the radical alienation of Sunnis. The late awakening of Iran, the U.S., and moderate Iraqis both Sunni and Shiite, to the dangers of the Maliki policies. The unraveling of the decade of Iraq rebuilding by the U.S. in such rapid manner leads to the stepping down of Maliki and beginning of a new non-sectarian approach and policies. The vacillating in the Obama adminstration's policies towards Syria and Iraq leads to a lack of direction in the region. ...

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A report released by the Organization for Economic Cooperation and Development (OECD) shows growing income inequality in 34 OECD countries. OECD Secretary General, Angel Gurria says: "The social contract is starting to unravel in many countries. This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, income inequality will continue to rise." Countries with the largest ratios between incomes at the top and the bottom, are the United States, Turkey and Israel, roughly 14 to 1. Germany, Denmark and Sweden have ratios of 6 to 1, with their ratios up from the 1980's. Gaps in Chile and Mexico are at 25 to 1. The study covers the period from 1980 to 2008. Overall inequality went up by 25% in the U.S. from 1980. In 2008 the top ten percent in the U.S. earned $114,000, 15 times than incomes for the bottom 10%. The top 1% of Americans saw incomes go up from 1980 to 2008, increasing from 8 percent to 18 percent. The richest 1% having $1.3 million in after tax income, and the lowest 20% making $17,700. The trends have accentuated an increase at the highest end- the top 1% and top 10% of the people- and a sharp decrease for the bottom 20%, which can be grasped from the $17,700 and the $1.3 million, both at extreme ends. The study attributes the rise in inequality to a growing gap in wages for highly skilled workers as technology advances, a surge in foreign direct investment and a looser regulatory regime that reduces employee protections leading to wage premiums for financial jobs and smaller incomes for workers at the bottom. Income groups and professions and sectors that had the greatest influence in government were able during this period to get the greatest protection for incomes, and able also to maximize their incomes. Incomes in the financial sector increased dramatically in the last decade, as a result of deregulation leading to higher risk and speculative activities in the financial sector, leading to the financial crisis of 2008-2009. Financial crises further depress incomes at the lower end. Similiar income inequality trends can be seen for India and China. China has a Ginni coefficient of 0.5 according to researchers at Beijing Normal University, up from 0.3 three decades ago- a Ginni Coefficient above 0.4 is considered destabilizing. Another factor that played a part in these countries is corruption and lobbying by special interests for favored treatment of sectors or groups. Austerity measures taken in Europe and in the U.S. are likely to widen income gaps by depressing the lower end income groups, creating social unrest, especially in the absence of efforts to stimulate growth....

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Posturing and negotiating between Republicans and Democrats on deficit reduction before the "fiscal cliff" of automatic spending cuts and tax increases on Jan. 1, 2013.

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Gen. Martin Dempsey took a cautious approach to U.S. involvement in Afghanistan and Syria. He did not approve of the way Gen. McChrystal expanded U.S. involvement in Afghanistan, and the hasty manner in which the Iraqi army was trained under his predecessors leading to some commanders being appointed who later became members of sectarian death squads. Under his command the U.S. limited its role in Afghanistan and Iraq and handed more responsibility to local forces. Gen. Dunford who succeeded Dempsey as chairman Joint Chiefs of Staff for the U.S. follows the cautious approach set by Dempsey. Dempsey's approach extends to what he believes is an Heisenberg effect in physics where when you you observe or touch something it changes the way it functions and operates. For critics such as Senator McCain, who served in Vietnam as a pilot, if Dempsey did not want to intervene in some country, he could invent the reasons not to get involved. President Obama exceeded the caution exercized by Dempsey, leading to a situation where the U.S. after hasty action under a Republican president seemed to lurch in the opposite direction under his Democratic successor by not taking action where U.S. presence was needed, followed by a corrective course to make up for this....

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The mortgage interest deduction mostly benefits wealthier people with larger mortgages who need it least, and who are likely to buy homes regardless of the deduction, say experts. Both the Brookings Institution and other experts such as Moody's chief economist, Mark Zandi, see the deduction as part of the negotiations for deficit reduction. The Brooking Institution's Ted Gayer, says the deduction subsidizes acitvity such as borrowing large amounts of money to buy larger homes which the U.S. should not want to subsidize in the current state of the country's finances. The Simpson-Bowles plan and the Feldstein-Romney plan sought to put unnecessary tax expenditures and deductions on the table for negotiation. The deduction was not part of the last tax reform in 1986 under president Reagan. Zandi says any changes should be phased in over a number of years so that housing sales ar not affected in the current recovery. David Stephens, CEO of the Mortgage Bankers Association says any changes should be implemented gradually. ...

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According to researchers at AARP and the Economic Policy Institute women over 50 years have a harder time than men of the same age in finding good jobs since the 2008 financial crisis. Older women who were laid off have a very hard time finding employment and steady jobs, as this report by Patricia Cohen in the NYT shows. Age, lack of internet skills, shifting networks, caregiving responsibilities and time off taken to care for children, all have worked against older women over 50 years. A study by the Federal Reserve Bank of St Louis shows that compared to 2006-2007 before the financial crisis hit when about a quarter of the unemployed for women over 50 years were unemployed over 6 months, by 2012-2013 the jobless women for more than 6 months had gone up to about half of the unemployed women in this age group.

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U.S. airline stocks surged in 2014. Energy stocks crashed in the 4th quarter of 2014 losing over 30% of their value as oil inventories surged. Russia and Greece were the worst performing countries with losses over 30% for funds in these countries. India stock funds returns exceeded 30%. High yield bonds performed badly, with higher returns on investment grade assets. Apple continued growth following the introduction of the iPhone 6, with the stock value growing by 38% in 2014.

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Jerry Muller, professor of history at the Catholic University of America, offers some useful insights into the nature of inequality in advanced capitalist societies and other parts of the world, and a clear eyed way to tackle the problem of inequality. Tackling the problem should be done in a way that preserves the economic protections for the middle class and the poor which are needed for capitalism to work- unemployment insurance, Medicare, Medicaid, Social Security, Earned Income Credit, and the Affordable Care Act. Much of this system is already in place in advanced capitalist societies. Incremental gains in this area will be much smaller and it is important to recognize the need for strengthening the economic engine that supports these benefits, says Muller. Economic dynamism has to be preserved and nurtured with human capital deployed in the best possible way, and competitiveness of countries increased. Each country and society has to find its own way of achieving this. The family matters, and matters a lot in taking advantage of educational opportunity, says Muller. The culture of different ethnic, immigrant groups, also matter. These differences were present in earlier periods in the nineteenth and twentieth century and are likely to remain. Strengthening the pool of human capital and deploying it is essential to progress. In an earlier book "Adam Smith In His Time and Ours- Designing a Decent Society," Muller emphasized the importance Smith placed on the civic duty of citizens to promote the welfare of the whole society, and the importance of education, family and moral character, with no substitute for the "general prevalence of wisdom and virtue." ...

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Stephen Moore of the WSJ interviews Grover Norquist, head of the advocacy group Americans for Tax Reform. Republicans in Congress and other Republican leaders have signed on to the "no new taxes pledge" promoted by Norquist. There is increasing pressure on Norquist as the media, White House, and executives on Wall Street call for flexible positions from both sides on taxes and spending cuts. Norquist insists that not much has changed. He says that the increase in taxes on the rich is only symbolic and has to be followed up with increasing taxes on the middle class. He cites a Rasmussen poll that shows 75% of Americans believe this. Norquist is convinced that the Democrats with their spending plans are out to take the U.S. in the direction of European economies, the tax increase on the rich would be followed up with a energy tax or a value added tax to pay for unrestrained spending. His solution is for Republicans to pass a bill that extends the current tax rates past January after roughing it through the tax cliff date. Even the sequester option is better than increasing taxes says Norquist, letting the Defense Department make the cuts where appropriate. Norquist does not favor the option of reducing tax loopholes and deductions as a way to increase taxes as proposed by Simpson Bowles commission and Ryan-Romney in the election campaign. ...

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U.S. Federal Reserve governor Daniel Tarullo tells the Council on Foreign Relations that so much remains to be done four years after the financial crisis. The law firm of Davis Polk says 67 percent of deadlines were missed for new rules required to be set in place by the Dodd-Frank legislation, including the Volcker Rule. Tarullo said: "It is sobering to recognize that more than four years after the failure of Bear Stearns began the acute phase of the financial crisis, so much remains to be done." Tarullo fears that crucial momentum may be lost because of the long delays stemming from resistance by the banks. Tarullo met with bank CEO's in April 2012. Banks have protested that Fed stress tests have not revealed the parameters for the testing. Tarullo's response given at a recent Fed conference in Chicago were that this would let banks game the exercize by running the Federal Reserve model and not improving risk management and capital planning, making this a mechanical compliance exercize. Banks have particularly opposed a requirement that limits the risk in business between two banks to 10% of their credit risk....

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Did U.S. Treaury Secretary, Timothy Geithner, ignore a key request by President Obama to present plans for the restructuring of Citigroup after the government bailout of Citigroup? Ron Suskind says this is what happened in his book on the Obama administration and how the White House operated to make key decisions. Ron Suskind, intervewed key members of the Obama White House economic policy team, Lawrence Summers, Christina Romer, Peter Orszag. In all Suskind conducted 700 hours of interviews for his new book in Sept 2011: "Confidence Men: Wall Street, Washington and the Education of a President." According to the book, in early 2009 after Obama authorized a series of stress tests for banks he told Geithner to develop a plan for restructuring Citigroup. A month later at a meeting not attended by Geithner Obama raised a question about the status of the plan. He was told by Romer that no restructuring plan had been developed for Citi. Suskind says Geithner disagreed about a plan to restructure Citi and decided to ignore the request. Geithner and the Treasury Department say Obama asked Geithner to develop a backup plan to overhaul banks if the government was forced to keep a big ownership stake in the companies, and "there was fortunately never a need to put them in place." Geithner told Suskind that he doesn't slow-walk the President on any matter. Other aspects of the operation of the economic policy team that Suskind covers are a series of memos from top aide Pete Rouse raising questions that ongoing communication between some members of the economic team and Summers was giving Summers power to shape policy. Summers, Director of the National Economic Council, is shown as trying to keep out the views of Romer and budget director Orszag from reaching the President without going through him. When Orszag gives a private report to the president on the deficit, Summers objects saying that this was immoral. Obama lacked the fresh ideas needed to tackle the problems created by the mortgage and banking crisis of 2008, when he used the Clinton administration economic policy team of the 1990's- Rubin, Bernanke, Summers and Geithner. Fresh approaches were needed two decades after Clinton's election in 1992, and the Bush administration that followed, as many of the problems developed during this period. The similiar embedded thinking was shared during the Clinton and Bush administrations and the economic advisors about dealings with the banking sector, but the situation for deficits, unemployment, housing, and the economy had completely changed requiring fresh approaches. ...