Free money for banks and not-so-free money for everybody else isn't such a crowd-pleaser.
In fact, it seems like welfare for the wealthy. It doesn't take much financial acumen to make a profit when you can get money for nothing from the Fed and lend it back to the government for a few hundred basis points. How can normal people get in on this? That's what former FDIC chief Sheila Bair asked in a recent tongue-in-cheek piece calling for the Federal Reserve to give everyone interest-free $10 million loans.
But there is nothing special about zero interest rates.
The below chart plots the difference between the 10-year Treasury yield and the Fed funds rate over the past 30 years. In other words, it's the profit that banks can make from lending risk-free. See if you can spot when the Fed pushed interest rates down to zero.
Short-term interest rates hit zero in December of 2008. The risk-free spread banks could earn jumped up then -- but it wasn't any higher than it had been in the past.
That makes sense. Long-term interest rates depend on expected short-term interest rates. When the economy looks bad, the market expects short-term interest rates to stay low -- which means that long-term rates do the same. The difference between short and long-term rates doesn't get much out of whack, even when rates are zero.
But Fed critics do have something of a point. The reason zero interest rates feel like such a giveaway is that lending standards have gotten much tougher for most everyone else. If you're not the government or a Fortune 500 company, it's hard to get a loan nowadays.
There's not great data on small business lending, but junk bond yields are a decent proxy. Here's the difference between those yields and the Fed funds rate.
Spreads skyrocketed when the crisis hit and have been slow to come down since. That the banks get free credit when everyone else is struggling to get any credit makes it galling. But it's not a "secret bailout" as some call it. The reality is more mundane: It's banks tightening credit standards -- probably too much -- after they were too loose during the bubble years.
There are plenty of things to be mad at the big banks and the Fed for over the last few years. But criticizing banks for lending for more than they borrow for, like Bair does, is triffling. That's just the definition of banking. Zero interest rates don't really change this. Our limited supply of outrage is better directed at actual outrages.
The president-elect described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the UK's lead and leave the bloc.
President-elect Donald Trump hasn’t been shy about sharing his views about the world, in general, and Europe, in particular. He was criticized during the presidential campaign for questioning the value of NATO, praising the U.K.’s decision to leave the EU, and linking terrorist attacks to the million or so asylum-seekers who have arrived in Europe since 2015. Trump’s supporters and political analysts attributed those comments to campaign-season rhetoric, and said he would pivot on these and other issues before the general election. But with less than a week before the inauguration at which he’ll be sworn in as the 45th president of the United States, Trump gave a joint interview to The Times (of London) and Bild, the mass-circulation German tabloid, during which he described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the U.K.’s lead and leave the bloc.
A new study shows that the disproportionate imprisonment rates faced by people of color contribute to race-based inequalities in educational attainment.
In the summer of 1963, Martin Luther King Jr. delivered the closing remarks at the March on Washington. More than 200,000 people gathered to cast a national spotlight on and mobilize resistance to Jim Crow, racist laws and policies that disenfranchised black Americans and mandated segregated housing, schools, and employment. Today, more than 50 years later, remnants of Jim Crow segregation persist in the form of mass incarceration—the imprisonment of millions of Americans, overwhelmingly and disproportionately black adults, in local, state, and federal prisons.
The U.S. incarceration rate is more than five times higher than that in most of the world’s nations, despite a crime rate that’s comparable to other politically stable, industrialized countries. And among the swelling number of incarcerated men and women is a vast number of parents. In 2015, The Atlantic’s Alia Wong highlighted a study from Child Trends that found that one in nine black children has had a parent in jail or prison, about twice as high as that for white children. For black adolescents ages 12 through 17, it’s nearly one in seven. Predictably, this has implications for America’s classrooms.
King's famous "Letter from Birmingham Jail," published in The Atlantic as "The Negro Is Your Brother" and excerpted below, was written in response to a public statement of concern and caution issued by eight white religious leaders of the South. It stands as one of the classic documents of the civil-rights movement.
While confined here in the Birmingham city jail, I came across your recent statement calling our present activities "unwise and untimely." Seldom, if ever, do I pause to answer criticism of my work and ideas. If I sought to answer all of the criticisms that cross my desk, my secretaries would be engaged in little else in the course of the day, and I would have no time for constructive work. But since I feel that you are men of genuine good will and your criticisms are sincerely set forth, I would like to answer your statement in what I hope will be patient and reasonable terms.
I think I should give the reason for my being in Birmingham, since you have been influenced by the argument of "outsiders coming in"
A history of the first African American White House—and of what came next
In the waning days of President Barack Obama’s administration, he and his wife, Michelle, hosted a farewell party, the full import of which no one could then grasp. It was late October, Friday the 21st, and the president had spent many of the previous weeks, as he would spend the two subsequent weeks, campaigning for the Democratic presidential nominee, Hillary Clinton. Things were looking up. Polls in the crucial states of Virginia and Pennsylvania showed Clinton with solid advantages. The formidable GOP strongholds of Georgia and Texas were said to be under threat. The moment seemed to buoy Obama. He had been light on his feet in these last few weeks, cracking jokes at the expense of Republican opponents and laughing off hecklers. At a rally in Orlando on October 28, he greeted a student who would be introducing him by dancing toward her and then noting that the song playing over the loudspeakers—the Gap Band’s “Outstanding”—was older than she was.
Is there room in the movement for people who morally object to abortion?
Updated on Monday, January 16 at 4:05 p.m.
Pro-life women are headed to D.C. Yes, they’ll turn out for the annual March for Life, which is coming up on January 27. But one week earlier, as many as a few hundred pro-lifers are planning to attend the Women’s March on Washington, which has been billed as feminist counterprogramming to the inauguration.
With organizations like Planned Parenthood and NARAL Pro-Choice America co-sponsoring the event, pro-life marchers have found themselves in a somewhat awkward position. What’s their place at an event that claims to speak for all women, but has aligned itself with pro-choice groups? With roughly a week to go before the march, organizers also released a set of “unity principles,” and one of them is “open access to safe, legal, affordable abortion and birth control for all people.”
Why some people are withdrawing from mainstream society into “intentional communities”—and what the rest of the country can learn from them
VIRGINIA— For the last eight years, Nicolas and Rachel Sarah have been slowly weaning themselves off fossil fuels. They don’t own a refrigerator or a car; their year-old baby and four-year-old toddler play by candlelight rather than electricity at night. They identify as Christian anarchists, and have given an official name to their search for an alternative to consumption-heavy American life: the Downstream Project, with the motto to “do unto those downstream as you would have those upstream do unto you.”
As it turns out, exiting the system is a challenging, time-consuming, and surprisingly technical process. Here in the Shenandoahs and central Virginia, a handful of tiny communities are experimenting with what it means to reject the norms of contemporary life and exist in a radically different way. They seem to share Americans’ pervasive sense of political alienation, which arguably reached an apotheosis with the election of Donald Trump: a sense of division from their peers, a distrust of government. The challenges of modern politics—dealing with issues like climate change, poverty, mass migration, and war on a global scale—are so vast and abstract that it’s difficult not to find them overwhelming. But instead of continuing in passive despair, as many Americans seem to do, the people in these communities decided to overhaul their lives.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.
Here is one matter, at least, in which the Swiss refuse to be neutral.
Nancy Holten, 42, was born in the Netherlands. At the age of 8, however, she moved with her family to Switzerland, which Holten has called home for the past 34 years. Holten currently resides, with her three daughters, in the small village of Gipf-Oberfrick, in the far north of the country, within the canton of Aargau. She speaks fluent Swiss-German. Her daughters are Swiss citizens. She has been a member of the parents’ committee of their school.
And yet Holten was recently rejected for a Swiss passport—which is also to say, effectively, for naturalized Swiss citizenship. For the second time.
The reason? In Switzerland, applications for naturalization are decided not at the federal level, but rather by the country’s cantons and municipalities—and the applicants’ peers have a say in whether naturalization gets granted. And, unfortunately for Nancy Holten, her peers are not inclined to give her the “gift” of a passport. Because, despite all the ways she is Swiss, Holten—a vegan who is extremely vocal about that life choice—has also stridently opposed one of the most beloved cultural traditions of Gipf-Oberfrick, and of Aargau, and of Switzerland itself: the practice of putting large bells around the necks of cows, for reasons both practical and ceremonial. Insert your preferred “more cowbell” joke here.
When it comes to basic policy questions such as the minimum wage, introductory economics can be more misleading than it is helpful.
In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.
Today in shoesplaining: Until your career is at its height, ladies, maybe you should stick to flats.
It went like this. At a reverse-demo event in New York last night, Jorge Cortell, the CEO of the healthcare startup Kanteron Systems, noticed a female attendee wearing shoes. He snapped a picture of the shoes. He then tweeted the picture of the shoes. This is what he said:
Sexist! the people cried. No, it's not! Cortell responded. His #brainsnotrequired musings were merely protective, he explained, of the health of the shoe-wearer. And, by extension, of the health of us all. Heels are dangerous. Heels are dumb. High-heeled shoes are not, as it were, "sensible shoes."